As filed with the Securities and Exchange Commission on March 24, 2004

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 20-F / A

(Amendment No. 1)





| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------------------



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





For the fiscal year ended December 31, 2002





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





For the transition period from
                 to



Commission File Number: 0-26840



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Telewest Communications plc

(Exact Name of Registrant as Specified in Its
Charter)



England and Wales

(Jurisdiction of Incorporation or Organization)



Export House, Cawsey Way, Woking, Surrey, GU21 6QX, United Kingdom

(Address of Principal Executive Offices)



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



None



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



Title of each class

Ordinary Shares of 10 pence each

American Depositary Shares, each representing

200 Ordinary Shares of 10 pence each,

evidenced by American Depositary Receipts



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:



None



Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close
of the period covered by the annual report.

2,873,506,513 Ordinary Shares of 10 pence each

82,507,747 Limited Voting Convertible Ordinary Shares of 10 pence each



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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
which financial statement item the registrant has elected to follow.





|         |  |             
|-------- |  | ------------
|Item 17 ̈ |  | Item 18    x



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TABLE OF CONTENTS



|                 |  |                                                 |  |   
|---------------- |  | ----------------------------------------------- |  | --
|EXPLANATORY NOTE |  | 1                                              
|                 |  |                                                
|PART I           |  |                                                 |  |   
|ITEM 3.          |  | KEY INFORMATION                                 |  | 2 
|ITEM 5.          |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS    |  | 20
|                 |  |                                                
|PART II          |  |                                                 |  |   
|ITEM 13.         |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |  | 43
|ITEM 15.         |  | CONTROLS AND PROCEDURES                         |  | 43
|                 |  |                                                
|PART III         |  |                                                 |  |   
|ITEM 18.         |  | FINANCIAL STATEMENTS                            |  | 44
|ITEM 19.         |  | EXHIBITS                                        |  | 44





i



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EXPLANATORY NOTE



This Annual
Report on Form 20-F/A (Form 20-F/A) is being filed as Amendment No. 1 to the Registrants Annual Report on Form 20-F for the fiscal year ended December 31, 2002 (Form 20-F). We are filing this Amendment No. 1 to our
Annual Report on Form 20-F to amend Item 3. Key Information, Item 5. Operating and Financial Review and Prospects, Item 13. Defaults, Dividend Arrearages and Delinquencies, Item 15. Controls and
Procedures and Item 18. Financial Statements contained in our Form 20-F originally filed with the Securities and Exchange Commission on June 30, 2003.



This Form 20-F/A is being filed for the purpose of providing additional details to Telewests disclosures in the
original Form 20-F in conjunction with the Registration Statement on Form S-4 of Telewest Global, Inc., which was initially filed on November 26, 2003. This Form 20-F/A contains a re-classification of certain long term debt in Telewests US
GAAP 2002 financial statements, contains changes to Item 13 (Defaults, Dividend Arrearages and Delinquencies) to reflect such re-classification and contains corresponding changes to Item 3 (Key Information), Item 5 (Operating and Financial Review
and Prospects) and Item 15 (Controls and Procedures).



Subsequent to the filing of the original Form 20-F, Telewest entered into a term sheet setting out an agreement among Telewest, Telewest Finance (Jersey) Limited (Telewest Jersey), an ad hoc committee of persons holding
bonds of Telewest and Telewest Jersey, W.R. Huff Asset Management Co. L.L.C., Liberty Media Corporation and IDT Corporation. Telewest has been informed that the parties to the term sheet hold, or have the right to vote, in aggregate, more than 48%
of Telewests outstanding share capital and over 60% in principal amount of the aggregate outstanding notes and debentures of Telewest and Telewest Jersey. The term sheet contemplates a restructuring of the balance sheet of Telewest (the
Financial Restructuring). The Financial Restructuring consists of, inter alia, the cancellation of all of the outstanding notes and debentures of Telewest and Telewest Jersey in return for the distribution of 98.5% of the common stock of
Telewest Global, Inc. (New Telewest), a newly-formed Delaware corporation that is currently a wholly-owned subsidiary of Telewest. The remaining 1.5% of the common stock of New Telewest will be distributed to the shareholders of Telewest
at the time of completion of the Financial Restructuring. In connection with the Financial Restructuring, New Telewest will enter into an amended senior secured credit facility that contemplates total committed credit facilities of term loans of
£1,840 million, a committed revolving credit facility of £140 million, a committed overdraft facility of £50 million and an uncommitted term loan facility of £125 million. Further details of the proposed amended senior
secured credit facility are included in Item 5 (Operating and Financial Review and Prospectus) under the heading Liquidity and Capital Resources. This brief summary of the Financial Restructuring is not intended to be a complete
description of the Financial Restructuring, which will be described in more detail in a shareholders circular and prospectus to be mailed to the holders of Telewest shares and Telewest American Depositary Shares if the Financial Restructuring
proceeds. The shareholders circular and prospectus is included in New Telewests Registration Statement on Form S-4.



This Form 20-F/A consists of (i) a cover page, (ii) this explanatory note, (iii) the information required by Item 3 (Key Information), Item 5 (Operating
and Financial Review and Prospects), Item 13 (Defaults, Dividend Arrearages and Delinquencies), Item 15 (Controls and Procedures) and Item 18 (Financial Statements), (iv) a signature page and (v) the principal executive officer and principal
financial officer certifications required to be included herein.



This Form 20-F/A does not reflect events occurring after the filing of the original Form 20-F, and does not modify or update the disclosures therein in any way other than as required to reflect the amendments described above. Other
than the items described above, no part of the Form 20-F filed on June 30, 2003 is being amended hereby, and this Form 20-F/A should not be understood to mean that any other statements contained therein are true or complete as of any date subsequent
to June 30, 2003.



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PART I



|ITEM 3. |  | KEY INFORMATION
|------- |  | ---------------



BASIS OF PRESENTATION OF INFORMATION



The Telewest Group



References in this Annual Report to Telewest and the Company are to Telewest Communications plc. References to New Telewest are to Telewest Global, Inc., currently a wholly-owned subsidiary of Telewest
and contemplated to be the parent corporation of Telewest if the Financial Restructuring is completed.



On November 1, 2000, Telewest acquired Eurobell (Holdings) PLC (Eurobell) from Deutsche Telekom AG (the Eurobell Acquisition). As
a result, Eurobell became a subsidiary of Telewest from that date.



On April 18, 2000, Telewest declared its offer for the issued and to be issued share capital of Flextech plc (Flextech) unconditional in all respects (the Flextech Merger). Flextechs core business is the supply
of pay-television channels and related services in the United Kingdom (UK). As a result of this merger, Flextech became a subsidiary of Telewest with effect from April 19, 2000.



On November 23, 1999, Telewest acquired the remaining 50% of Cable London plc
(Cable London) that it did not already own (the Cable London Acquisition). As a result, Cable London became a subsidiary of Telewest from that date.



On September 1, 1998, Telewest completed its merger with General Cable PLC (General Cable), then the fifth
largest cable company in the UK based on the number of franchise homes (the General Cable Merger). As a result of this merger, General Cable became a subsidiary of Telewest.



At the time of the General Cable Merger, General Cable owned, among other things, a 44.95% interest in Birmingham Cable
Corporation Limited (Birmingham Cable), the owner of one cable franchise in the UK. The remaining interests in Birmingham Cable were then owned 27.47% by Telewest (through a subsidiary), 27.47% by Comcast UK Cable Partners Limited
(Comcast UK) and 0.11% by several individual shareholders. During October and November 1998, Telewest acquired the interests owned by Comcast UK and the individual shareholders (together, the Birmingham Acquisitions) and now
owns 100% of Birmingham Cable.



References in this Annual
Report to the Telewest Group, the Group, the Combined Group, we, us and our are to Telewest and its consolidated subsidiaries and references to the Telewest Group as of a
specified date or for a specified period give effect to the acquisitions of Flextech, General Cable and Eurobell, and the outstanding interests in Birmingham Cable and Cable London from the date of each respective acquisition.



Financial Information



We prepare financial statements on the basis of generally accepted accounting principles in the United States (US
GAAP) and on the basis of generally accepted accounting principles in the UK (UK GAAP), in each case, on the basis of a fiscal year beginning on January 1 and ending on December 31. The financial statements and information with
respect to the Telewest Group included in this Annual Report have been prepared in accordance with US GAAP.



The economic environment in which we operate is the UK and hence our reporting currency is pounds sterling. On March 23, 2004 the Noon Buying Rate of the
Federal Reserve Bank of New York was £1 =$1.8502.



Sources of
Information



All information concerning the number of
homes passed (homes for which Telewest has completed network construction) or homes passed and marketed is based on physical counts made by Telewest during its network construction or marketing phases. In the case of homes
for which the network construction or marketing was completed by another operator, the information on the number of homes passed or passed and marketed is based on the records of the relevant operator. All information
concerning the franchise areas covered by General Cable PLC, Birmingham Cable Corporation Limited, Cable London PLC and Eurobell (Holdings) PLC before their respective acquisitions by Telewest has been provided by, or derived from data provided by,
General Cable, Birmingham Cable, Cable London and Eurobell, as the case may be. All information in this Annual Report concerning Flextechs share of basic television viewing is based on data measured by Broadcasters Audience Research
Board Limited. All other statistics in this Annual Report relating to Telewests content segment are based on information compiled by independent agencies or by Flextechs or Telewests management.



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Industry Terms



References in this Annual Report to homes passed are to homes in respect of which we have completed network construction.



Forward-looking Statements



This Annual Report contains statements that are, or may be deemed to be,
forward-looking statements within the meaning of US securities laws. These forward-looking statements relate to, among other things, our anticipated cost savings, revenue growth, operating efficiencies, future liquidity, introduction of services and
our plans and objectives. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.



Some of the statements in this Annual Report constitute forward-looking
statements. These statements relate to future events or Telewests future financial performance, including, but not limited to, strategic plans, potential growth (including penetration of developed markets and opportunities in emerging
markets), product introductions and innovation, meeting customer expectations, planned operational changes (including product improvements), expected capital expenditures, future cash sources and requirements, liquidity, customer service
improvements, cost savings and other benefits of acquisitions or joint venturespotential and/or completedthat involve known and unknown risks, uncertainties and other factors that may cause Telewests or its business actual results,
levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may,
will, could, would, should, expect, plan, anticipate, intend, believe, estimate, predict, potential or
continue or the negative of those terms or other comparable terminology.



There are a number of important factors that could cause Telewests actual results and future development to differ materially from those expressed or implied by those forward-looking statements, including, but
not limited to:



| | · | Telewests ability to successfully conclude the restructuring of its balance sheet;
| | - | -----------------------------------------------------------------------------------



| | · | the extent to which Telewest is able to compete with other providers of broadband internet services, including British Telecommunications plc;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | · | the extent to which consumers regard cable telephony as an attractive alternative to telephony services provided by, for example, British Telecommunications plc;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the extent to which Telewest is able to successfully compete with mobile network operators;
| | - | -------------------------------------------------------------------------------------------



| | · | the extent to which Telewest is able to retain its current customers and attract new customers;
| | - | -----------------------------------------------------------------------------------------------



| | · | the extent to which Telewest is able to migrate customers to additional products or services or to high-margin products or services;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | the extent to which regulatory and competitive pressures in the UK telephony market continue to reduce prices;
| | - | --------------------------------------------------------------------------------------------------------------



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| | · | Telewests ability to develop and introduce attractive interactive and high-speed data services in a rapidly changing and highly competitive business environment;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Telewests ability to penetrate markets and respond to changes or increases in competition;
| | - | -------------------------------------------------------------------------------------------



| | · | Telewests ability to compete against digital television service providers, including British Sky Broadcasting Group plc and Freeview, by increasing its digital customer base;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Telewests ability to compete with other internet service providers;
| | - | --------------------------------------------------------------------



| | · | Telewests ability to have an impact on, or respond to, new or changed government regulations;
| | - | ----------------------------------------------------------------------------------------------



| | · | Telewests ability to improve operating efficiencies, including through cost reductions;
| | - | ----------------------------------------------------------------------------------------



| | · | Telewests ability to maintain and upgrade Telewests network in a cost-efficient and timely manner;
| | - | ----------------------------------------------------------------------------------------------------



| | · | adverse changes in the price or availability of telephony interconnection or cable television programming; and
| | - | --------------------------------------------------------------------------------------------------------------



| | · | disruption in supply of programming, services and equipment.
| | - | ------------------------------------------------------------



Unless otherwise required by applicable securities laws, Telewest disclaims any intention or obligation to publicly update or revise any of the
forward-looking statements after the date of this Annual Report to conform them to actual results, whether as a result of new information, future events or otherwise. All of the forward-looking statements are qualified in their entirety by reference
to the factors discussed under the caption Risk Factors in this Annual Report which describe risks and factors that could cause results to differ materially from those projected in those forward-looking statements.



These risk factors may not be exhaustive. Other sections of this Annual
Report may describe additional factors that could adversely impact Telewests business and financial performance. Telewest operates in a continually changing business environment, and new risk factors may emerge from time to time. Management
cannot anticipate all of these new risk factors, nor can they definitively assess the impact, if any, of new risk factors on Telewest or the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results.



4



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A. SELECTED FINANCIAL DATA



The following selected consolidated financial data for the Telewest Group as
of December 31, 2001 and 2002 and for the three years ended December 31, 2002 has been derived from the audited consolidated financial statements of the Telewest Group included elsewhere in this Annual Report and has been prepared in accordance with
US GAAP. The selected consolidated financial data as of December 31, 1998, 1999 and 2000 and for the two years ended December 31, 1999 has been derived from our audited consolidated financial statements as of such dates for each of those respective
years.



You should read our selected financial data in
conjunction with the information contained in Item 5 Operating and Financial Review and Prospects and the consolidated financial statements of the Telewest Group and the related notes thereto included elsewhere in this Annual
Report.



Subsequent to the issuance of its consolidated
financial statements as of and for the year ended December 31, 2002, Telewest determined the need to adjust the classification of debt previously reflected as long term in the consolidated balance sheet (£1.8 billion at December 31,
2002), to write off associated deferred financing costs (£11 million at December 31, 2002) and to account for default interest in respect of unpaid interest on defaulted notes and debentures (£2 million at December 31, 2002). As a result
of the adjustments, the information presented in the following table differs from that previously presented in Telewests filings with the US Securities and Exchange Commission. See Note 3 to Telewests consolidated financial statements on
page F-7 of this Annual Report.



After completion of the
Financial Restructuring, the financial statements of New Telewest will reflect the application of fresh start accounting as described in Statement of Position Financial Reporting Entities in Reorganization under the Bankruptcy
Code, or SOP 90-7, issued by the American Institute of Certified Public Accountants. The adoption of fresh start accounting will result in the determination of the reorganization value of New Telewest and the allocation to assets
in conformity with the procedures specified by Financial Accounting Standards Board, or FASB, Statement No. 141 and each liability will be stated at present value of the amount to be repaid. Fresh start accounting is expected to change
the value of New Telewests tangible and intangible assets with an associated change in its future depreciation and amortization expense as compared to Telewests financial statements included elsewhere in this Annual Report.



|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|----------------------------------------------------------------------- |  | ------------------------------------ | ----- | - | ------- | - | ----- | ------- |  | - | ------ | - |  | ------------- | ------ | - |  | - | ------ | -
|                                                                        |  | Year Ended December 31,              |      
|                                                                        |  | 1998(1)                              |       |   | 1999(2) |   |       | 2000(3) |  |   | 2001   |   |  | 2002 Restated |       
|                                                                        |  | (in millions, except per share data) |      
|Statement of Operations Data:                                           |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Revenue                                                                 |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Cable television                                                        |  | £                                    | 202   |   |         | £ | 258   |         |  | £ | 279    |   |  | £             | 329    |   |  | £ | 336    |  
|Consumer telephony                                                      |  |                                      | 233   |   |         |   | 334   |         |  |   | 445    |   |  |               | 488    |   |  |   | 495    |  
|Internet and Other(4)                                                   |  |                                      | 20    |   |         |   | 17    |         |  |   | 16     |   |  |               | 40     |   |  |   | 63     |  
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Total Consumer Sales Division                                           |  |                                      | 455   |   |         |   | 609   |         |  |   | 740    |   |  |               | 857    |   |  |   | 894    |  
|Business Sales Division                                                 |  |                                      | 84    |   |         |   | 177   |         |  |   | 248    |   |  |               | 268    |   |  |   | 283    |  
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Total Cable Segment                                                     |  |                                      | 539   |   |         |   | 786   |         |  |   | 988    |   |  |               | 1,125  |   |  |   | 1,177  |  
|Content Segment                                                         |  |                                      |      |   |         |   |      |         |  |   | 81     |   |  |               | 129    |   |  |   | 106    |  
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Total Revenue                                                           |  | £                                    | 539   |   |         | £ | 786   |         |  | £ | 1,069  |   |  | £             | 1,254  |   |  | £ | 1,283  |  
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Operating Costs and Expenses                                            |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Cable programming expenses                                              |  |                                      | (103  | ) |         |   | (132  | )       |  |   | (132   | ) |  |               | (142   | ) |  |   | (128   | )
|Cable telephony expenses                                                |  |                                      | (82   | ) |         |   | (158  | )       |  |   | (235   | ) |  |               | (235   | ) |  |   | (218   | )
|Content Segment expenses                                                |  |                                      | 0     |   |         |   | 0     |         |  |   | (46    | ) |  |               | (83    | ) |  |   | (70    | )
|Depreciation                                                            |  |                                      | (224  | ) |         |   | (305  | )       |  |   | (423   | ) |  |               | (469   | ) |  |   | (495   | )
|Impairment of fixed assets(5)                                           |  |                                      |      |   |         |   |      |         |  |   |       |   |  |               |       |   |  |   | (841   | )
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Cost of sales                                                           |  |                                      | (409  | ) |         |   | (595  | )       |  |   | (836   | ) |  |               | (929   | ) |  |   | (1,752 | )
|Selling, general and administrative expenses                            |  |                                      | (208  | ) |         |   | (307  | )       |  |   | (445   | ) |  |               | (497   | ) |  |   | (526   | )
|Amortization of goodwill                                                |  |                                      | (36   | ) |         |   | (62   | )       |  |   | (147   | ) |  |               | (183   | ) |  |   |       |  
|Impairment of goodwill(5)                                               |  |                                      |      |   |         |   |      |         |  |   |       |   |  |               | (766   | ) |  |   | (1,445 | )
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|                                                                        |  | £                                    | (653  | ) |         | £ | (964  | )       |  | £ | (1,428 | ) |  | £             | (2,375 | ) |  | £ | (3,723 | )
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Operating Loss                                                          |  | £                                    | (114  | ) |         | £ | (178  | )       |  | £ | (359   | ) |  | £             | (1,121 | ) |  | £ | (2,440 | )
|Other income/(expense)                                                  |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Interest income                                                         |  |                                      | 15    |   |         |   | 7     |         |  |   | 15     |   |  |               | 15     |   |  |   | 19     |  
|Interest expense (including amortization of debt discount)(6)           |  |                                      | (206  | ) |         |   | (313  | )       |  |   | (385   | ) |  |               | (487   | ) |  |   | (528   | )
|Foreign exchange (losses)/gains, net                                    |  |                                      | (12   | ) |         |   | (49   | )       |  |   | (15    | ) |  |               |       |   |  |   | 213    |  
|Share of net losses of affiliates and impairment(5)                     |  |                                      | (19   | ) |         |   | (6    | )       |  |   | (15    | ) |  |               | (216   | ) |  |   | (118   | )
|Minority interest in losses/(profits) of consolidated subsidiaries, net |  |                                      | 1     |   |         |   | (1    | )       |  |   | 1      |   |  |               | 1      |   |  |   | 1      |  
|Other, net                                                              |  |                                      | 2     |   |         |   | (1    | )       |  |   | (3     | ) |  |               | (3     | ) |  |   | 36     |  
|Tax benefit                                                             |  |                                      |      |   |         |   |      |         |  |   | 6      |   |  |               | 70     |   |  |   | 28     |  
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Net loss(6)                                                             |  | £                                    | (333  | ) |         | £ | (541  | )       |  | £ | (755   | ) |  | £             | (1,741 | ) |  | £ | (2,789 | )
|                                                                        |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Basic and diluted loss per ordinary share                               |  |                                      | (23p  | ) |         |   | (25p  | )       |  |   | (28p   | ) |  |               | (60p   | ) |  |   | (97p   | )
|Weighted average number of ordinary shares outstanding                  |  |                                      | 1,422 |   |         |   | 2,197 |         |  |   | 2,705  |   |  |               | 2,880  |   |  |   | 2,873  |  
|Other Financial Data:                                                   |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Cash provided by/(used in) operating activities                         |  | £                                    | 9     |   |         | £ | 34    |         |  | £ | (4     | ) |  | £             | 13     |   |  | £ | 103    |  
|Cash used in investing activities                                       |  |                                      | (634  | ) |         |   | (859  | )       |  |   | (556   | ) |  |               | (561   | ) |  |   | (365   | )
|Cash provided by financing activities                                   |  |                                      | 636   |   |         |   | 849   |         |  |   | 555    |   |  |               | 502    |   |  |   | 638    |  
|Capital expenditure(7)                                                  |  |                                      | 251   |   |         |   | 463   |         |  |   | 525    |   |  |               | 546    |   |  |   | 447    |  
|Ratio of earnings to fixed charges(8)                                   |  |                                      |      |   |         |   |      |         |  |   |       |   |  |               |       |   |  |   |       |  
|Balance Sheet Data (at period end):                                     |  |                                      |       |   |         |   |       |         |  |   |        |   |  |               |        |   |  |   |        |  
|Property and equipment, net                                             |  | £                                    | 2,457 |   |         | £ | 2,818 |         |  | £ | 3,289  |   |  | £             | 3,473  |   |  | £ | 2,598  |  
|Total assets                                                            |  |                                      | 3,978 |   |         |   | 4,568 |         |  |   | 7,324  |   |  |               | 6,332  |   |  |   | 4,095  |  
|Investments                                                             |  |                                      | 27    |   |         |   | 4     |         |  |   | 784    |   |  |               | 547    |   |  |   | 376    |  
|Total debt and capital leases                                           |  |                                      | 2,626 |   |         |   | 3,268 |         |  |   | 4,499  |   |  |               | 5,135  |   |  |   | 5,654  |  
|Shareholders equity/(deficit)                                          |  |                                      | 1,041 |   |         |   | 953   |         |  |   | 2,145  |   |  |               | 451    |   |  |   | (2,386 | )



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---

|(1) | Includes results of operations of General Cable PLC and Birmingham Cable Corporation Limited from September 1, 1998 (the date we acquired General Cable PLC and its interest in
Birmingham Cable).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes results of operations of Cable London PLC from November 23, 1999 (the date we acquired the 50% of Cable London we did not already own).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes results of operations of Flextech from April 19, 2000 (the date we acquired Flextech) and the results of Eurobell (Holdings PLC) from November 1, 2000 (the date we acquired
Eurobell).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Other consists primarily of the sale of cable publications (and, in 1998, management services provided to other cable operators).
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(5) | In the fourth quarter of 2001, we recorded a goodwill impairment charge of £766 million and wrote down the value of our investments in affiliates by £202 million. In the
fourth quarter of 2002 we recorded a fixed asset impairment charge of £841 million, a goodwill impairment charge of £1,445 million and wrote down the value of our investments in affiliates by £130 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements 4, 44 and 64, Amendment of FASB 13, and Technical Corrections. SFAS 145 provides for the
rescission of several previously issued accounting standards, new accounting guidance for the accounting for certain lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. The Group has
adopted this standard from January 1, 2002 and reclassified £15 million and £20 million from extraordinary items to interest expense for the years ended December 31, 2001 and 1999, respectively. No material adjustments have been required
in 1998, 2000 or 2002.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Represents cash paid for property and equipment, net of cash received upon dispositions of property and equipment, of £6 million, £5 million, £2 million, £2
million and £1 million, respectively, for the years presented.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | For the purpose of these computations, earnings consist of net loss plus taxes and fixed charges. Fixed charges consist of interest on indebtedness (including amortization of debt
issuance costs) plus that portion of lease rental expense representative of the interest factor (deemed to be one-third of lease rental expense). The deficiency of earnings to fixed charges for the years ended December 31, 1998, 1999, 2000, 2001 and
2002 was £314 million, £535 million, £746 million, £1,595 million and £2,699 million, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



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Exchange Rate Information



The following table sets forth, for information purposes only, for the periods ended and dates indicated, certain
information concerning the exchange rate for pounds sterling based on the noon buying rate of the Federal Reserve Bank of New York (the Noon Buying Rate). No representation is made that pound sterling amounts have been, could have been
or could be converted into, US dollars at the Noon Buying Rate or at any other rate.



|                                                                                                                                                                                                         |  |                |  |                  |  |      |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | ---------------- |  | ---- |  | ----
|Year Ended December 31,                                                                                                                                                                                  |  | Period End (1) |  | Average Rate (2) |  | High |  | Low 
|1998                                                                                                                                                                                                     |  | 1.66           |  | 1.66             |  | 1.72 |  | 1.62
|1999                                                                                                                                                                                                     |  | 1.61           |  | 1.61             |  | 1.67 |  | 1.55
|2000                                                                                                                                                                                                     |  | 1.50           |  | 1.51             |  | 1.65 |  | 1.40
|2001                                                                                                                                                                                                     |  | 1.45           |  | 1.44             |  | 1.50 |  | 1.37
|2002                                                                                                                                                                                                     |  | 1.61           |  | 1.51             |  | 1.61 |  | 1.41
|2003                                                                                                                                                                                                     |  | 1.78           |  | 1.65             |  | 1.78 |  | 1.55
|2004 (through March 23, 2004)                                                                                                                                                                            |  | 1.85           |  | 1.84             |  | 1.90 |  | 1.79
|(1)    Represents the Noon Buying Rate on the last business day of the applicable period. (2)    The average of the Noon Buying Rates on the last business day of each month during the relevant period.



The following table
sets forth the high and low exchange rates during the previous 14 months.



|                                    |  |      |  |     
|----------------------------------- |  | ---- |  | ----
|Month Ended                         |  | High |  | Low 
|January 2003                        |  | 1.65 |  | 1.60
|February 2003                       |  | 1.65 |  | 1.57
|March 2003                          |  | 1.61 |  | 1.56
|April 2003                          |  | 1.60 |  | 1.55
|May 2003                            |  | 1.65 |  | 1.59
|June 2003                           |  | 1.68 |  | 1.63
|July 2003                           |  | 1.67 |  | 1.59
|August 2003                         |  | 1.62 |  | 1.57
|September 2003                      |  | 1.66 |  | 1.57
|October 2003                        |  | 1.70 |  | 1.66
|November 2003                       |  | 1.72 |  | 1.67
|December 2003                       |  | 1.78 |  | 1.72
|January 2004                        |  | 1.85 |  | 1.79
|February 2004                       |  | 1.90 |  | 1.82
|March 2004 (through March 23, 2004) |  | 1.87 |  | 1.79



The Noon Buying Rate
on March 23, 2004 was £1.00 = $1.8502.



B.
CAPITALIZATION AND INDEBTEDNESS



Not applicable.



C. REASONS
FOR THE OFFER AND USE OF PROCEEDS



Not applicable.



D. RISK FACTORS



Investments in our securities involve risks. Investors should carefully consider the following discussion of risks and the other information in this Annual Report. For the convenience of the reader the below risks
have been divided into risks relating to the financial restructuring, risks relating to financing and indebtedness and risks relating to our operations.



7



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RISK FACTORS



After completion of the Financial
Restructuring, New Telewest will continue to be subject to significant risks.



Telewest has historically been unable to fund its operations through operating cash flow, and New Telewest may not be able to fund its operations through operating cash flow in the future.



Telewest has historically not been able to fund its operating expenses,
capital expenditures and debt payment obligations through operating cash flow and has therefore incurred substantial indebtedness. After the Financial Restructuring, New Telewest will continue to be required to devote a significant portion of its
cash flow from operations to senior debt obligations under the proposed amended senior secured credit facility and to capital expenditures, thereby reducing funds available for other purposes. Further details of the proposed amended senior secured
credit facility are included in Item 5 (Operating and Financial Review and Prospects) under the heading Liquidity and Capital Resources. Although interest payments will be significantly reduced after the cancellation of Telewests
outstanding notes and debentures, it is possible that New Telewest may continue to incur losses and may not achieve or sustain sufficient cash flow in the future for the payment of interest, the meeting of capital expenditure needs and/or other
purposes. If New Telewests operating cash flow is not sufficient to meet its operating expenses, capital expenditures and debt payment obligations, it may be forced to raise cash or reduce expenses by doing one or more of the following:



| | · | increasing, to the extent permitted, the amount of borrowings under the proposed amended senior secured credit facility;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | restructuring or refinancing its indebtedness prior to original maturity;
| | - | -------------------------------------------------------------------------



| | · | delaying or reducing capital expenditures necessary to maintain its network and respond to technological developments and increased competition;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | · | selling or disposing of some of its assets, possibly on unfavorable terms;
| | - | --------------------------------------------------------------------------



| | · | revising or delaying the implementation of its strategic plans; or
| | - | ------------------------------------------------------------------



| | · | foregoing business opportunities, including acquisitions and joint ventures.
| | - | ----------------------------------------------------------------------------



New Telewest could also be forced to seek additional equity capital, which could dilute the interests of the holders of its common stock.



Telewest cannot be sure that any of the above actions would be sufficient
to fund New Telewests operations.



New
Telewests obligations to service its substantial indebtedness will significantly reduce available cash flow, impact its ability to obtain additional financing and limit its flexibility in reacting to competitive and technological changes.



After giving effect to the Financial Restructuring,
New Telewest and its subsidiaries will have substantial indebtedness and may incur additional indebtedness in the future. On a pro forma consolidated basis, New Telewest and its subsidiaries would have had approximately £2.06 billion of
indebtedness, including approximately £1.84 billion under the proposed amended senior secured credit facility, outstanding as of December 31, 2002. New Telewests substantial consolidated level of indebtedness, and associated interest
payment obligations, will:



| | · | limit cash flow available for general corporate purposes, including any acquisitions;
| | - | -------------------------------------------------------------------------------------



| | · | limit its ability to obtain necessary financing for working capital, capital expenditure or business opportunities and to implement its business strategies;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | limit its flexibility in reacting to competitive, technological and other changes;
| | - | ----------------------------------------------------------------------------------



| | · | expose it to a risk that a decrease in net cash flows due to economic developments or adverse developments in its business could make it difficult or impossible to meet senior debt
payment obligations; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | expose it to risks inherent in interest rate fluctuations.
| | - | ----------------------------------------------------------



8



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New Telewests operations and financing activities will be restricted by covenants in the
proposed amended senior secured credit facility.



The
proposed amended senior secured credit facility to be entered into by Telewests subsidiary, Telewest Communications Networks Limited, or TCN, will contain a number of significant restrictions and covenants that will limit New Telewests,
TCNs and their subsidiaries ability to:



| | · | acquire businesses or assets;
| | - | -----------------------------



| | · | engage in mergers, consolidations and asset dispositions;
| | - | ---------------------------------------------------------



| | · | make capital expenditures and investments;
| | - | ------------------------------------------



| | · | enter into debt and preferred equity financings;
| | - | ------------------------------------------------



| | · | pay dividends or redeem or repurchase capital stock;
| | - | ----------------------------------------------------



| | · | amend debt and other material agreements; and
| | - | ---------------------------------------------



| | · | sell equity of, or receive distributions from, subsidiaries.
| | - | ------------------------------------------------------------



TCN will also be required to comply with specified financial ratios and performance covenants. There will also be significant restrictions on New
Telewests and Telewest UKs ability to engage in activities other than acting as holding companies. These restrictions could affect New Telewests ability to operate its business and may limit its ability to take advantage of
potential business opportunities as they arise.



In the future,
New Telewest may enter into other debt financing arrangements that impose similar or additional restrictions.



If New Telewest is unable to comply with the financial and performance covenants in the proposed amended senior secured credit facility, the lenders
under that agreement, referred to as the Senior Lenders, could impose additional restrictions on New Telewest or accelerate repayment of all amounts due under that facility.



New Telewests ability to comply with the financial and performance covenants in the proposed amended senior secured
credit facility or any alternative financing will depend on a number of factors, including its operating performance, the level of interest rates, its subsidiaries ability to use Telewests net operating losses for tax purposes and cash
flow, as well as other factors that it may have failed to anticipate or that are beyond its control.



If New Telewest, TCN and the other New Telewest subsidiaries that are a party thereto do not comply with these or other covenants and restrictions
contained in the proposed amended senior secured credit facility, and other agreements governing their existing or future indebtedness, they would be in default under those agreements. As a result of a default, the Senior Lenders could cause all of
the outstanding indebtedness under the proposed amended senior secured credit facility to become due and payable, require New Telewest to apply all of its cash to repay the indebtedness or prevent New Telewest from making debt service payments on
any other indebtedness it owes. If its indebtedness is accelerated, New Telewest may not be able to repay its debt or borrow sufficient funds to refinance that debt. In addition, any default under the proposed amended senior secured credit facility,
or agreements governing its other existing or future indebtedness, is likely to lead to an acceleration of indebtedness under any other debt instruments that contain cross-acceleration or cross-default provisions. If the indebtedness under the
proposed amended senior secured credit facility is accelerated, New Telewest is unlikely to have sufficient assets to repay that debt, or other indebtedness then outstanding.



New Telewest may not be able to refinance the proposed amended senior secured credit facility at its final maturity.



The proposed amended senior secured credit facility
will consist of total committed credit facilities of approximately £2.03 billion, most of which will mature on December 31, 2005. Telewest does not expect New Telewest to be able to generate sufficient free cash flow to be able to repay that
debt on December 31, 2005 and will therefore need to refinance a substantial portion of the proposed amended senior secured credit facility before that date. If New Telewest is unable to refinance the proposed amended senior secured credit facility,
the Senior Lenders would be entitled to accelerate all outstanding indebtedness under the proposed amended senior secured credit facility and could also seek to enforce their security interest over substantially all of New Telewests assets.



9



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Telewest is currently in default on various operating contracts and may take steps in connection
with the Financial Restructuring that will result in additional defaults or breaches.



Telewests failure to pay interest on its outstanding notes and debentures has resulted in defaults or breaches under some of its operating contracts. Steps taken in connection with the Financial Restructuring
also have resulted, and may result in the future, in additional defaults or breaches. Material contracts currently in default or breach and likely to be the subject of future defaults or breaches include:



| | · | Telewests interconnection agreements with British Telecommunications plc, which govern the terms of the interconnection of its network with British Telecommunications
network;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | certain of Telewests master leasing agreements and finance leases, which provide it with financing to purchase equipment necessary to operate its business; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | certain of Telewests real estate leases relating to its corporate headquarters, call centers and technical facilities.
| | - | -----------------------------------------------------------------------------------------------------------------------



These defaults or breaches may give the counterparty the right to terminate
the relevant operating contract. If material operating contracts are terminated, or renegotiated on less favorable terms, New Telewest could lose assets or commercial contracts important to its business. Any such event could result in disruption of
operations, increased costs, loss of subscribers or revenues, and other adverse consequences to New Telewests business, the impact of which cannot be predicted or quantified. The most important unquantifiable consequence would be the loss of
key operational contracts and relationships.



Adverse
publicity relating to the Financial Restructuring and the financial condition of New Telewest and other participants in the markets in which it operates may adversely affect New Telewests customer and supplier relationships and market
perception of its business.



Adverse publicity
relating to the Financial Restructuring and the financial condition of New Telewest, other cable and pay-television operators, and alternative telecommunications carriers may materially adversely affect New Telewests business by making it
difficult to convince customers to continue with, or to subscribe to, New Telewests services and making suppliers demand quicker payment terms or not extend normal trade credit, all of which could further materially adversely affect New
Telewests working capital position. In addition, suppliers may choose not to continue to supply New Telewest with products and services and New Telewest may find it difficult to obtain new or alternative suppliers. Ongoing negative publicity
may also have a long-term negative effect on the Telewest brand name, which could make it more difficult for New Telewest to market products and services in the future.



New Telewest and Telewest UK will be holding companies and will depend upon cash from their subsidiaries to meet their
obligations.



After the Financial Restructuring, New
Telewest will be a holding company with no independent operations or significant assets other than its investments in and advances to subsidiaries. In order to meet its obligations, New Telewest will rely on receiving sufficient cash from its
subsidiaries. New Telewests subsidiaries will be restricted by the covenants in the proposed amended senior secured credit facility from paying dividends, repaying loans and making other distributions to New Telewest and Telewest UK. In
particular, the proposed amended senior secured credit facility would generally restrict the funds available to New Telewest from TCN to £5 million a year and would limit the use of such funds. Future debt instruments may contain similar
restrictions that may prevent New Telewest from meeting its obligations.



Moreover, Telewest UK expects to indemnify Telewest and Telewest Jersey for any of their obligations not compromised pursuant to the Telewest and Telewest Jersey schemes, except certain expenses of Telewests
shareholders and noteholders arising as a result of the Financial Restructuring, and will rely on funds provided by its subsidiaries in meeting its obligations under that indemnity. Covenants in the proposed amended senior secured credit facility
will severely restrict the funds available to Telewest UK to meet the indemnity obligation.



10



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The directors of New Telewest may change Telewests current long-range plan.



Telewest expects that when the Financial
Restructuring is completed, New Telewests board of directors will include only one director who is currently on Telewests board of directors. All of the remaining New Telewest directors will have been designated by certain of the
existing principal holders of Telewests notes and debentures. In addition, it is contemplated that New Telewest will work together with certain of those noteholders to develop an operating business plan based on Telewests current
long-range plan through the fiscal year 2005. As a result, it is likely that New Telewest will make changes (which could be material) to the business, operations and current long-range plan of Telewest. It is impossible to predict what these changes
will be and the impact they will have on New Telewests future results of operations and its share price.



New Telewest may be subject to taxation in multiple jurisdictions.



If New Telewest is deemed to have its place of central management and control in the United Kingdom, it will be subject to
taxation in both the United States and the United Kingdom. If that is the case, New Telewests effective tax rate and aggregate tax liability will be affected by a number of factors, including differences in tax rates in the United States and
the United Kingdom, tax treaties between the United States and the United Kingdom, and future changes in the law. As a result, New Telewest may pay income taxes in one jurisdiction for a particular period even though on an overall basis it incurred
a net loss for that period or may otherwise have a higher aggregate tax liability.



It may be difficult to compare New Telewests future financial statements as a result of fresh start accounting.



In connection with the Financial Restructuring, it is expected that New Telewest will adopt fresh start
accounting in accordance with SOP 90-7 as of the effective date of the Telewest scheme. Under SOP 90-7, New Telewest will establish a new accounting basis, and record its existing assets and liabilities at their respective fair values. As a result,
New Telewests balance sheet and results of operations after the Financial Restructuring will not be comparable in many material respects to the balance sheet or results of operations reflected in Telewests historical financial statements
for periods prior to the effective date of the Telewest scheme, included elsewhere in this Annual Report. In addition, the final results of operations of Telewest will probably include a gain on the extinguishment of Telewests outstanding
notes and debentures. This may make it more difficult to compare New Telewests performance with the historical performance of Telewest.



Following the Financial Restructuring, a significant percentage of the outstanding shares of New Telewest common stock may be held by a small number
of stockholders, who may have conflicts of interest.



Following the Financial Restructuring, it is anticipated that some Telewest bondholders, including potentially some or all of the bondholders who have designated a member of New Telewests initial board of directors, will become
significant stockholders of New Telewest. As a result of these relationships, when conflicts arise between the interests of significant stockholders and the interests of New Telewests other stockholders, directors designated by the affected
significant stockholders may not be disinterested. These stockholders may also have or make significant investments in other telecommunications companies, including NTL, Inc. and BSkyB. This may result in conflicts of interest. Actions these
stockholders take relating to these investments may conflict with the interests of New Telewests other stockholders. Under Delaware law, transactions that New Telewest enters into in which a director has a conflict of interest are generally
permissible as long as the material facts as to the directors or officers relationship to or interest in the transaction are disclosed to New Telewests board of directors and a majority of its disinterested directors approves the
transaction, or the transaction is otherwise fair to New Telewest.



If the UK merger control regime applied to the Financial Restructuring, it would require substantial management and financial resources and could require divestment by major stockholders.



The UK merger control regime could potentially be triggered by the Financial
Restructuring in the event that any one New Telewest stockholder acquires sufficient shares of New Telewest common stock and rights of control to materially influence the commercial policy of New Telewest. If the UK merger control regime were to be
triggered by the Financial Restructuring, it could result in an investigation. Any UK merger investigation would require substantial management and financial resources that would otherwise be devoted to New Telewests



11



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business. If the transaction were found to result in a substantial lessening of competition or, following intervention by the Secretary of State, to be
contrary to the public interest, sanctions could result in one or more major stockholders being required to divest all or a portion of their interests in New Telewest which could adversely affect the market for New Telewest common stock.



There is a risk that the Financial Restructuring will not be completed.



The Financial Restructuring is unlikely to be
implemented if Liberty Media and IDT Corporation do not vote in favor of the resolution necessary to complete the Financial Restructuring.



IDT and Liberty Media beneficially own over 23% and 25%, respectively, of Telewests outstanding share capital. IDT and Liberty Media are expected to
enter into voting agreements with Telewest by which they will agree, among other things, to vote in favor of the shareholder resolution required for completion of the Financial Restructuring. The voting agreements currently contemplate that they may
be terminated if certain events occur that would cause the Financial Restructuring to fail to be completed. If IDT and Liberty Media do not vote in favor of the shareholder resolution, the Financial Restructuring is unlikely to be implemented as
currently contemplated.



Approval of the Financial
Restructuring is not assured.



The Financial
Restructuring is subject to a number of conditions and uncertainties over which Telewest has limited control. For example, Telewest has received notice from some sterling noteholders of their intention to object in the court hearings for the
Telewest scheme to the exchange rate to be used for purposes of allocating New Telewest common stock to scheme creditors. If any one of the conditions to the Financial Restructuring is not met, the Financial Restructuring may not be completed, in
which case the Senior Lenders and other creditors of Telewest may accelerate outstanding indebtedness, commence receivership or administration proceedings and exercise other remedies. Under these circumstances, Telewests directors may have no
option but to take steps to put Telewest into administration or insolvent liquidation.



If the conditions precedent to the effectiveness of New Telewests proposed amended senior secured credit facility are not satisfied or waived, the Financial Restructuring will not be completed.



The effectiveness of the Telewest scheme, the
settlement of certain swap agreements and the waiver of breaches relating to certain master leasing agreements will be contingent on the conditions in New Telewests proposed amended senior secured credit facility being met. In addition,
successful entry into the proposed amended senior secured credit facility agreement will require that the conditions set forth in a commitment letter be met and that the Senior Lenders have not exercised their termination rights pursuant to that
letter.



If the Financial Restructuring does not occur,
Telewests directors may have to petition for administration or an insolvent liquidation of Telewest.



Telewests directors have been able to permit Telewest to continue to do business in large measure as a direct result of the continued support of its
creditors (in general, not calling defaults or accelerating their claims) and the Telewest directors belief that the Financial Restructuring is likely to be implemented. However, Telewests directors do not believe that its creditors will
continue to forebear from declaring defaults if the Financial Restructuring is not implemented or if it is not implemented in a timely manner. Without the support of its creditors, Telewests directors will have no option but to take steps to
put Telewest into some sort of



12



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insolvency procedure in order to protect Telewests assets for the benefit of all of Telewests creditors. This is likely to consist of either
administration or insolvent liquidation. As a result of taking these steps, a large number of Telewests commercial contracts would become subject to termination.



Even if Telewest were able to avoid liquidation immediately after a failure to complete the Financial Restructuring, and if
it received waivers of all the events of default that had occurred prior to that date, Telewest may still be unable to ultimately avoid liquidation.



If the Financial Restructuring does not occur and Telewest is forced to enter into an insolvency procedure, holders of Telewests shares or American
Depository Receipts (or ADRs) may receive no value for their shares or ADRs. Insolvency procedures could result in a sale of all or a part of Telewest. Proceeds from that sale are unlikely to be sufficient to repay outstanding indebtedness and other
creditors, resulting in no payment to holders of Telewests shares or ADRs.



The Senior Lenders under the existing senior secured credit facility may accelerate the existing facility and/or appoint an administrative receiver.



Steps taken by Telewest to effect the Financial Restructuring have resulted
in several events of default under the existing senior secured credit facility. As a result, the Senior Lenders are entitled to accelerate repayment of amounts under the existing senior secured credit facility. If the Financial Restructuring is
completed, the defaults under Telewests existing senior secured credit facility will in effect be waived. If the Financial Restructuring is not completed, however, these defaults are unlikely to be waived and the Senior Lenders could
accelerate such indebtedness. Telewest does not have sufficient cash resources to repay the existing senior secured credit facility if it is declared immediately due and payable. The Senior Lenders could also seek to take control of the assets over
which they hold security, which represent most of Telewests assets, by appointing a receiver for TCNs shares or an administrative receiver for TCN.



Risks Related to the New Telewest common stock to be issued and distributed in the Financial Restructuring



If the Financial Restructuring is completed, your interest in the
business of Telewest will be very significantly diluted or you may not retain any interest at all.



If the shareholder resolution is approved and the other conditions to the Financial Restructuring are met, Telewest shareholders will receive only 1.5% of
New Telewest. Telewest shareholders and holders of Telewest ADRs entitled to receive a fraction of a share based on their holding of Telewest shares or ADRs on the last day of trading will receive cash in lieu of fractional share entitlements. As a
result, Telewest shareholders and ADR holders will have their interests significantly diluted or may not retain any interest at all. In either case, Telewest shareholders and ADR holders may have no effective voice in the management of New Telewest.



The market value of the shares of New Telewest received
by Telewest shareholders in connection with the Financial Restructuring may be less than the current value of the shares of Telewest.



The value of the shares of New Telewest common stock will depend on the public trading price of the shares of New Telewest common stock after the
Financial Restructuring. New Telewest will not trade publicly until the Financial Restructuring is completed. As a result, the market value of shares of New Telewest common stock received in the Financial Restructuring will not be known until the
Financial Restructuring is completed.



The large number
of shares eligible for public sale after the Financial Restructuring could cause New Telewests stock price to decline and make it difficult for New Telewest to sell equity securities.



When the Financial Restructuring is completed, the Telewest and Telewest
Jersey scheme creditors will own 98.5% of New Telewests outstanding common stock. Most of these creditors are not in the business of holding equity on a long-term basis. Some of these stockholders will also have rights, subject to various
conditions, to require New Telewest to file one or more registration statements, including the right to have New Telewest file a



13



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shelf registration statement covering their shares, or to include their shares in registration statements that New Telewest may file for itself
or on behalf of other stockholders. Sales by these stockholders of a substantial number of shares after the Financial Restructuring may significantly reduce the market price of New Telewests common stock. Moreover, the perception that these
stockholders might sell significant amounts of common stock could depress the trading price of the common stock for a considerable period. Sales of these shares, and the possibility of these sales, could make it more difficult for New Telewest to
sell equity, or equity-related securities, in the future at a time, and price, that New Telewest considers appropriate.



Due to Telewests recent financial condition and the historical volatility of the shares of cable, telecommunications and internet companies,
the market price of the New Telewest common stock is likely to be volatile.



As a result of a number of factors, including Telewests recent financial condition and its participation in markets that have experienced historical price volatility, the market price for Telewests shares
has been volatile and the market price for the New Telewest common stock is also likely to be volatile, perhaps even more so than the stock market in general, and the market for cable, telecommunications and internet companies in particular. Factors
that could cause volatility in the market price for New Telewest common stock in the future may include, among other things:



| | · | actual or anticipated variations in its operating results;
| | - | ----------------------------------------------------------



| | · | new products or services, whether New Telewests or those of its competitors;
| | - | -----------------------------------------------------------------------------



| | · | changes in financial estimates by securities analysts covering New Telewest;
| | - | ----------------------------------------------------------------------------



| | · | changes in the market valuations of other cable, telecommunications and internet companies;
| | - | -------------------------------------------------------------------------------------------



| | · | large increases or decreases in capital commitments;
| | - | ----------------------------------------------------



| | · | additions or departures of its key personnel; and
| | - | -------------------------------------------------



| | · | issuances of common stock by New Telewest.
| | - | ------------------------------------------



Due to Telewests troubled financial history and its participation in historically volatile markets, these factors may negatively affect the market
price for New Telewest common stock to a greater extent than they would other companies, in some cases regardless of its operating performance.



Shares may be issued to employees under share option plans, which could dilute the value of New Telewests common stock.



As part of the Financial Restructuring, New Telewest intends to set aside a
portion of its total post-Financial Restructuring common stock to be used in option plans designed to incentivize its employees, senior executives and directors. New Telewest has not yet determined the number of shares that it will set aside for
this purpose. The issuance of additional common stock, or the announcement that additional common stock will be issued, in connection with these stock option plans that is in excess of investors expectations may result in a reduction in the
market price of New Telewests common stock.



Some
provisions of New Telewests certificate of incorporation, by-laws and proposed amended senior secured credit facility may discourage or prevent a takeover of New Telewest, even if a takeover might be beneficial to its stockholders.



Provisions of New Telewests certificate and
by-laws may have the effect of delaying or preventing an acquisition or merger in which New Telewest is acquired or a transaction that changes New Telewests board of directors. New Telewests board of directors has also authorized the
adoption of a stockholder rights plan which is triggered when certain conditions are met, including the acquisition of 25% or more of New Telewests shares by any person. If triggered, the stockholder rights plan will result in the acquisition
of New Telewest being uneconomic for a potential acquirer. In addition, under the terms of the proposed amended senior secured credit facility, there



14



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would be a mandatory prepayment and cancellation of the entire facility if (i) any person holds, or any persons acting in concert hold, directly or
indirectly, 30% or more of either the voting or the economic interest in New Telewest, or (ii) TCN (or any affiliate of TCN) merges with any other entity.



The Delaware law provisions, a prepayment provision in the proposed amended senior secured credit facility described above, and/or the stockholder rights
plan could make it more difficult for a third party to acquire New Telewest, even if doing so might be beneficial to its stockholders. These provisions, or the stockholder rights plan, could likewise limit the prices that investors might be willing
to pay in the future for New Telewests common stock. Some of these provisions would not have been permissible for Telewest because, under the UK City Code on Takeovers and Mergers and English law, it is possible to exercise anti-takeover
protection mechanisms only in very limited circumstances. New Telewest, as a Delaware corporation, is not subject to the City Code.



Risks Related to Telewests Operations



Telewest may not be able to compete successfully in the highly competitive telephony, multi-channel television and broadband internet markets.



The level of competition is intense in all of the
markets in which Telewest competes. In particular, its key cable telephony and cable television businesses compete in markets dominated by its competitors: British Telecommunications plc, or BT, in telephony and British Sky Broadcasting plc, or
BSkyB, in multi-channel television. Each of BT and BSkyB have significantly greater economies of scale and resources than Telewest and therefore are in a better position to invest in developing and acquiring proprietary technology, to expand into
new business fields, to take advantage of economies of scale with suppliers and to increase their market shares. These advantages are also increasingly important in the broadband internet market where BT has demonstrated a strong interest in
developing and marketing broadband internet products.



In the
cable television market, competition has been increased as a result of the launch of Freeview in October 2002, which provides a free 30-channel digital service to consumers who purchase a set-top box, or had previously purchased a set-top box for
use with the now defunct ITV Digital or who own an integrated digital television.



In the telecommunications market, in addition to competition from fixed-line telephony providers such as BT, falling mobile phone tariffs have resulted in mobile telephony becoming more competitive with
Telewests cable telephony products.



If Telewest is
unable to compete successfully, it may not be able to attract new customers or retain its existing customers, particularly for higher-margin services.



High customer churn could result in a failure to achieve anticipated revenue levels.



Telewest has experienced rapid growth and development in a relatively short
period of time, both in the nature of the services it offers and in the number of subscribers for those services. This growth has challenged Telewests ability to provide uniform customer service across its customer base and to integrate
training and operations support systems, such as billing and accounts receivable functions, across its business. At the same time, Telewest faces strong competition in the markets in which it competes and its customers can readily purchase products
and services substantially similar to its own from other providers. Telewest believes that these factors have contributed to its historically high levels of customer churn as compared to cable companies in the United States. Customer churn is a
measure of the percentage of customers disconnecting from Telewests services in a given period and is considered to be an indicator of the level of customer satisfaction or dissatisfaction with Telewests products and services, including
customer service.



Telewest increased the prices for a number
of its products and services in April 2002 and March 2003 and its current long-range plan anticipates some additional price increases. Price rises generally lead to higher customer churn among customers who are sensitive to price fluctuations.



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Telewest cannot predict whether it will continue to have similarly high, or higher, rates of customer
churn as a result of rapid growth and development, a failure to improve customer service, price increases or for other reasons. High rates of customer churn could negatively affect operating results by, for example, reducing revenues or increasing
the cost of sales.



The industries in which Telewest
participates are subject to rapid and significant changes in technology, and the effect of technological changes on Telewests businesses cannot be predicted.



The internet, cable and telecommunications industries are characterized by rapid and significant changes in technology. The
effect of future technological changes on Telewests businesses cannot be predicted. It is possible that products or other technological breakthroughs may result in Telewests core offerings becoming outdated and less competitive. Telewest
may not be able to develop new products and services at the same rate as its competitors or keep up with trends in the technology market as well as its competitors. For example, Telewest has not yet decided to introduce a video-on-demand service for
the time being, despite the introduction of this service by BSkyB. This decision was driven in part by the capital expenditures that would be required.



As part of its current long-range plan, Telewest has focused on reducing its capital expenditures. As a result, Telewest may not be able to maintain the
technological competitiveness of its core products or maintain or increase its market share in key market segments. If Telewests products and services are not competitive, it is likely to lose customers and business, its turnover will decline
and its businesses will be materially adversely affected. The cost of implementing emerging and future technologies could be significant, and Telewests ability to fund that implementation may depend on its ability to obtain additional
financing. Telewest cannot be certain that it would be successful in obtaining any additional financing required.



If Telewest does not maintain and upgrade its networks in a cost-effective and timely manner, it could lose customers and revenues.



Maintaining an uninterrupted and high quality service
over its network infrastructure is critical to Telewests ability to attract and retain customers. Providing a competitive service level depends in part on Telewests ability to maintain and upgrade its networks in a cost-effective and
timely manner. The maintenance and upgrade of its networks will depend upon, among other things, its ability to:



| | · | modify network infrastructure for new products and services;
| | - | ------------------------------------------------------------



| | · | install and maintain cable and equipment; and
| | - | ---------------------------------------------



| | · | finance maintenance and upgrades.
| | - | ---------------------------------



New Telewests proposed amended senior secured credit facility will limit the level of total capital expenditure that New Telewest can incur. If this
affects New Telewests ability to replace network assets at the end of their useful lives or if there is any reduction in its ability to perform necessary maintenance on network assets, New Telewests networks may have an increased failure
rate, which is likely to lead to increased customer churn and the effects described above.



Insolvency or non-performance by parties from whom Telewest will lease fiber-optic cable could result in the loss of cable service in some coverage areas.



Approximately nine percent of Telewests fiber-optic cable is owned by
other licensed operators and is leased to Telewest on an indefeasible rights of use basis. In the event of insolvency or non-performance by the counterparties to these indefeasible rights of use, there is a risk that cable service could
be lost in parts of the areas in which Telewest operates.



Telewest depends on key information systems for billing, customer management and service delivery over its networks, the failure of which could result in a loss of customers or failure to collect payments due from customers.



Telewest relies on a number of software applications
for billing, customer management and the delivery of services over its networks. The ability of Telewest to maintain accurate customer records for billing and



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marketing purposes is critical to its ability to collect revenue and market to its existing customer base. If Telewest is unable to maintain, upgrade or
expand these systems to meet future operational needs, maintain adequate back-up facilities or adequately protect its systems through firewalls and access controls it may lose customers, or fail to collect payments from customers.



Regulation of the markets in which Telewest provides its services has
been changing rapidly; unpredictable changes in UK and European Union regulations affecting the conduct of Telewests business, including price regulations, may have an adverse impact on New Telewests ability to raise prices, enter new
markets or control its costs.



Telewests
principal business activities are regulated and supervised by various governmental bodies in the United Kingdom and by the regulatory initiatives of the European Commission. Regulatory changes have recently occurred, and may in the future occur, at
the UK or EU level with respect to licensing requirements, price regulation, interconnection arrangements, number portability, carrier pre-selection, the ability to provide digital services, ownership of media companies, programming, local loop
unbundling, the provision of open access by UK cable operators to other telecommunications operators, the adoption of uniform digital technology standards or the bundling of services. Regulatory changes relating to the activities of New Telewest and
its competitors, such as changes relating to access to cable networks, the costs of interconnection with other networks or the prices of competing products and services, could adversely affect New Telewests ability to raise prices, enter new
markets or control its costs.



The UK and EU merger
control regimes may affect Telewests ability to enter into a merger or acquisition that it otherwise believes will benefit Telewest and its stockholders.



Telewests participation in any substantial merger or acquisition with another company in its industry may lead to
significant increases in market share. A merger of this sort may be investigated by either the Office of Fair Trading or, depending on jurisdiction issues, the Merger Task Force of the European Commission. The Office of Fair Trading is likely to
investigate any substantial merger involving Telewest, which would lead to the creation of a company supplying more than 25% of the pay television market in the United Kingdom or enhancing the market share of a company supplying more than 25% of the
pay television market in the United Kingdom.



It is likely that
any proposed merger or acquisition between Telewest and another company in its industry would also be subject to consideration by the UK Office of Communications. The UK Office of Communications would then provide advice to the regulatory body
considering the proposed merger or acquisition.



In the United
Kingdom, mergers that appear to raise significant competition or antitrust issues may be referred to the UK Competition Commission for an in-depth investigation. Similarly, any merger being reviewed by the European Commission could, if significant
competition issues were revealed, involve an in-depth Phase II investigation. Given that there has been considerable consolidation in the UK cable sector, the merger control process could limit the possibilities for any future
consolidation.



Telewest may not be able to achieve, or
realize benefits from, any further consolidation in the UK cable industry.



Telewest and other cable companies in the United Kingdom have historically grown through consolidation. The UK cable industry now consists of two principal participants, Telewest and NTL, Inc. As a result, the
opportunities for Telewest to grow through acquisitions are limited. Telewest cannot assure you that any attempt to consolidate would be successful or that any anticipated benefits of consolidation would be realized on a timely basis or at all.
Risks associated with business combinations include the loss of contractual rights by virtue of change of control provisions, difficulties in integrating accounting policies and systems and loss of key employees.



Telewests future dependence on BSkyB and other suppliers for
television programming could have a material adverse effect on New Telewests ability to provide attractive programming at a reasonable cost.



Telewest obtains a significant amount of its premium programming, some of its basic programming and pay-per-view sporting events from BSkyB, or a BSkyB
joint venture. BSkyB is a leading supplier of



17



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programming to cable television operators and is the exclusive supplier of some programming, including the Sky Sports channels and the most popular premium
subscription film channels available in the United Kingdom.



There is also programming carried by competing digital service providers that may not be available to Telewests digital television subscribers. Telewests inability to obtain this programming, or any other popular programming, or
to obtain it at a reasonable cost, could materially adversely affect the number of subscribers to its cable television service.



Telewest competes directly in the provision of pay-television services with BSkyB, from which it will also purchase content.



In addition to providing programming to cable operators, BSkyB competes with
Telewest and other UK cable operators by offering its programming directly to its digital satellite customers. As a result of BSkyBs ownership of this content, it is able to offer this content to its subscribers at a price that will be
challenging for Telewest to match and still maintain a profit margin on the sale of that premium programming. BSkyB may also offer content exclusively to its digital satellite customers and not to Telewest.



Telewest relies on key suppliers to provide programming, which may
increase its content acquisition costs.



In addition to
BSkyB, Telewests significant programming suppliers include Viacom, Discovery and Turner, a division of Time Warner. Suppliers of popular programming may decide to introduce new channels to be packaged with their existing programming options or
otherwise increase Telewests costs of purchasing existing and new programming. Telewests dependence on these suppliers for television programming could have a material adverse effect on its ability to provide attractive programming at a
reasonable cost.



Disruptions in Telewests
satellite transmissions could materially adversely affect its content segment operations.



Telewests content segment, Flextech, currently broadcasts its digital services with Astra satellite transponders leased from Société
Européene des Satellites. The operation of the Astra satellites is beyond Flextechs control. Disruption to the satellites would result in a disruption to Flextechs content services and, depending upon the nature of that
disruption, could result in a loss of revenues, a loss of customers and/or adverse publicity. The satellite transponders may fail before the expiration, in December 2013, of Telewests contractual right to utilize them which may result in
additional costs as alternative arrangements are made for satellite transmission.



The development of technology that enables unauthorized access to Telewests networks could result in a loss of revenue.



Telewest relies on the integrity of its networks to ensure that its services are provided only to identifiable paying
customers. Telewest has experienced piracy of its analog television services by individuals who have circumvented the security features on its set-top boxes.



Telewest may not be able to maintain the integrity of its network. The development of new technology facilitating unauthorized access to New
Telewests network could result in a loss of revenue.



Telewest may not be granted rights to its programming content over the internet.



All of the contracts governing Telewests acquired television programming grant Telewest the right to broadcast that programming over analog and/or
digital television platforms. Telewest may not be granted any rights to transmit that programming content over the internet. Failure to obtain internet transmission rights could prevent Telewest from utilizing this content in connection with
internet technologies and could result in competitors providing some of the content Telewest broadcasts over its analog and/or digital television platforms through the internet in competition with Telewest.



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Telewests operations depend on critical systems housed in a relatively small number of
locations, which could result in significant network outages in the event of a natural disaster, terrorist attack, war or other catastrophic event.



Telewests operations depend on many sophisticated, critical systems, which support all of the various aspects of its operations from network to
billing and customer service systems. The hardware supporting a large number of those critical systems is housed in a relatively small number of locations. In particular, Telewest has only a single originating point for its digital television
services, known as a headend, located in Knowsley. On December 31, 2003, the Knowsley headend was flooded resulting in an outage of Telewests digital television services. If the Knowsley headend or one or more other locations were to be
subject to fire, natural disaster, terrorism, power loss, break-in or other catastrophe in the future, it could result in network-wide or local outages in Telewests network services. Any outages would result in lost revenues, potential loss of
customers and/or adverse publicity. In addition, the transmission of material that contains any viruses over Telewests networks, or other electronic devices, intended to damage, or otherwise cause harm to or interfere with, its networks, could
also result in a loss of revenues.



Telewest depends on
the ability to attract and retain key personnel without whom it may not be able to manage its business lines effectively.



Telewests future success is likely to depend in large part on its continued ability to attract and retain highly skilled and qualified personnel. As
a result of Telewests financial condition and the Financial Restructuring, New Telewest may have difficulty in attracting and retaining highly skilled and qualified personnel.



Telewest has incurred, and will continue to incur, significant costs in connection with the Financial Restructuring,
substantially all of which must be paid regardless of whether the Financial Restructuring occurs.



Telewest has had to incur significant costs in connection with the Financial Restructuring and will continue to do so until the Financial Restructuring is
completed. These costs principally relate to compensation and fees payable to Telewests financial, legal and accounting advisers as well as advisers to significant stakeholders who have been impacted by Telewests need to restructure.
Pursuant to the terms of engagement with these advisers, substantially all of these costs will be paid regardless of whether the Financial Restructuring occurs. As at December 31, 2003, costs incurred in connection with the Financial Restructuring
were approximately £47 million (excluding Value Added Tax, or VAT). Telewest currently expects that total Financial Restructuring costs will be in excess of £100 million (excluding VAT).



In the event that the Financial Restructuring is not completed on the terms
disclosed in this Annual Report, Telewest believes that substantial additional costs may be incurred as a result of the likely need to petition for some sort of insolvency procedure.



Telewests financial advisers will be paid an advisory fee, part of which is contingent on the completion of the
Financial Restructuring.



Pursuant to the terms of
their respective engagement letters with Telewest, Citigroup and Gleacher are entitled to £13 million and at least £4 million, respectively, upon the successful completion of the Financial Restructuring. Both Citigroup and Gleacher are
expected to provide opinions on the fairness, from a financial point of view, of the Financial Restructuring to Telewests shareholders.



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|ITEM 5. |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- |  | --------------------------------------------



OPERATING RESULTS



You should read the following discussion and analysis of Telewests financial condition and results of operations together with the audited
consolidated financial statements and notes to the financial statements included elsewhere in this Annual Report.



Overview



Since Telewests
flotation in 1994, it has incurred substantial operating and net losses and has incurred substantial borrowings, principally to fund the capital costs of its network construction and operations and the acquisition of UK cable assets. However,
Telewest has not achieved the penetration rates or revenues anticipated when its debt was incurred, and a number of factors, including the well-publicized downturn in the telecommunications, media and technology sectors, increasingly tight capital
markets and the downgrading of Telewests corporate credit ratings, have severely limited Telewests access to financing and consequently impaired its ability to service and refinance its debt. As of December 31, 2002, substantially all of
Telewests debt was in default.



Telewest generated
operating and net losses in all periods under discussion. Losses increased year-on-year through the end of 2002, reflecting that revenue growth was slowing while expenses were increasing. In particular, net losses for the year ended December 31,
2002, include the effects of a significant write-down of network assets and goodwill.



Since early 2002, Telewest has been exploring strategic options and negotiating with the Bondholder Committee and the Senior Lenders. During this period, Telewest also conducted an operational review, leading to the
adoption of the current long-range plan in December 2002. This plan reflects a shift in operational focus from subscriber acquisition to increasing average revenue per user and decreasing churn. This plan focuses on acquiring profitable customers,
and cost control, and reflects the constraints on the capital available to Telewest. Telewests aim is to be the leading broadband communications group in the United Kingdom, measured by free cash flow, customer service and broadband
deployment. Accordingly, Telewests focus and strategy under the current long-range plan is:



| | · | in the consumer sales division, to be the broadband leader in the geographic areas in which it operates and to use that broadband leadership to drive the triple
play penetration of high-speed internet bundled with television and telephony;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | in the business sales division, to focus on profitable small-to-medium-sized enterprise, or SME, customers and to continue to build a profitable data-led business in the
larger corporate and public sector;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | in the content segment, to become a significant force in multi-channel television by leveraging its relationship with the BBC, through UKTV and by targeting niche markets
with its wholly owned channels, and UKTV channels; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | to make the most of its existing capital investment by exploiting previous investments in network efficiency, rather than network expansion or investment in new product development,
and to maximize the capital efficiency of its network by, among other things, ensuring appropriate recovery and reuse of customer premises equipment.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Telewest aims to reduce its operating cost base through a more selective customer acquisition approach, new customer
self-service initiatives and a continued focus on the efficiency of network maintenance and corporate expenditure. A strong focus on cash and cost control is intended to speed Telewests progress towards generating a positive free cash flow
position after the completion of the Financial Restructuring.



The current long-range plan is in the early stages of implementation, so it is not possible to predict whether Telewest or New Telewest will implement it successfully. Moreover, the board of directors of New Telewest may, upon further
review, revise or replace the plan. Nevertheless, Telewests discussion of operating results focuses on the key factors identified in the current long-range plan because these are the performance indicators on which management is currently
focused, and represent in managements view potential drivers of growth and operating results in the future.



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Basis of Presentation



Telewest
is currently in default on all of its outstanding notes and debentures, its existing senior secured credit facility and a number of other obligations. Telewest is in the process of seeking the approval of its creditors and shareholders for a
restructuring that is proposed to eliminate these defaults and significantly reduce its outstanding indebtedness. The report of KPMG, Telewests independent auditors, to the financial statements included in this Annual Report noted that there
is substantial doubt about the ability of Telewest to continue as a going concern. The financial statements were prepared assuming Telewest would continue as a going concern.



Telewest has historically presented its financial statements both on the basis of US GAAP and on the basis of UK GAAP. The
financial statements of Telewest and its consolidated subsidiaries included in this Annual Report have been prepared in accordance with US GAAP and are presented in pounds sterling, which is Telewests operating currency. The financial
statements of New Telewest, which is a Delaware corporation, will in the future be prepared in accordance with US GAAP and presented in pounds sterling. New Telewest will not present its financial statements on the basis of UK GAAP in the future.



Because New Telewest is a newly-incorporated wholly owned
subsidiary of Telewest that has no assets, liabilities or operating history, no financial statements have been prepared for New Telewest. After the successful completion of the Financial Restructuring, New Telewest will become the holding company
for the operating companies that currently carry on the business of Telewest.



Subsequent to the issuance of its consolidated financial statements as of and for the year ended December 31, 2002, Telewest determined the need to adjust the classification of debt previously reflected as long
term in the consolidated balance sheet (£1.8 billion at December 31, 2002), to write off associated deferred financing costs (£11 million at December 31, 2002) and to account for default interest in respect of unpaid interest on
defaulted notes and debentures (£2 million at December 31, 2002). As a result of the adjustments, the information presented in the Managements Discussion and Analysis of Financial Condition and Results of Operations differs from that
previously presented in Telewests filings with the US Securities and Exchange Commission. See Note 3 to Telewests consolidated financial statements on page F-7 of this Annual Report.



On April 19, 2000, Telewest acquired Flextech plcs pay-television
channels and related services in the UK. As a result of this acquisition, Flextechs results are included in Telewests consolidated results with effect from April 19, 2000.



Telewest acquired Eurobell (Holdings) PLC from Deutsche Telekom AG on November 1, 2000. As a result, Eurobells results
are included in Telewests consolidated results from that date.



Accounting Impact of the Financial Restructuring



Fresh Start Accounting



New
Telewest will apply fresh start accounting, as set out in the Statement of Position Financial Reporting by Entities in Reorganization under the Bankruptcy Code, or SOP 90-7, issued by the American Institute of Certified
Public Accountants, to account for the Financial Restructuring and related transactions. Under fresh start accounting, an independent third-party financial adviser has provided an estimated value range which New Telewest will use to
determine its final reorganization value for the purposes of applying fresh start accounting.



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The reorganization value will be allocated, based on estimated fair values provided by an independent
appraiser, to all of New Telewests identifiable assets in accordance with the procedures specified by Statement of Financial Accounting Standards No. 141, or SFAS No. 141.



New Telewest will apply the new valuations to its financial statements and results of operations as of the effective date of
Telewests scheme of arrangement.



As a result of the
application of fresh start accounting, New Telewests consolidated balance sheet, as well as its future depreciation and amortization expense, will differ from that presented in the historical consolidated financial statements of
Telewest included elsewhere in this Annual Report. In particular, fresh start accounting will change the value of New Telewests tangible and intangible assets with an associated change in its depreciation and amortization expense
as compared to Telewest.



Cancellation of Indebtedness



In addition, the Financial Restructuring will result
in the cancellation of approximately £3.6 billion of notes and debentures including the unpaid accrued interest on those notes and debentures, leaving outstanding approximately £1.8 billion in debt under the proposed amended senior
secured credit facility and approximately £150 million of other long-term liabilities, including obligations under various capital leases. As a result, New Telewests interest expense will decline significantly in comparison to the
interest expense incurred by Telewest in periods prior to the Financial Restructuring.



Potential Change to Long-Range Plan



The Financial Restructuring will result in a subsidiary of New Telewest succeeding to substantially all of Telewests operating companies and assets and assuming responsibility for the satisfaction of all of Telewests debts,
obligations and liabilities that have not been compromised as part of the Financial Restructuring, except certain expenses of Telewests shareholders and noteholders arising as a result of the Financial Restructuring. In addition, a new
board of directors, most of whom were designated by members of the Bondholder Committee and W.R. Huff, has been appointed for New Telewest. As contemplated by the September 12, 2003 term sheet relating to the Financial Restructuring, New Telewest
will work together with certain noteholders to develop a fully funded operating business plan based on Telewests current long-range plan through the fiscal year 2005. As a result of the changes in the board of the directors and the
reassessment of Telewests business plan, New Telewests business strategy may change, which could have a material effect on future results of operations and financial condition.



Future Income Subject to US Federal Income Tax



The Financial Restructuring transactions will likely result in New
Telewests earnings being subject to US federal income tax and might therefore subject New Telewest to a higher effective income tax rate than is currently the case for Telewest, which is not subject to US federal income tax. As non-US persons,
Telewest and its foreign subsidiaries are generally not subject to tax in the United States on their income derived from sources outside the United States. However, New Telewest will be subject to US federal income tax on its worldwide income. In
addition, because New Telewest will have foreign subsidiaries meeting the definition of a controlled foreign corporation, certain types of income of those foreign subsidiaries will be taxable to New Telewest.



Use of Estimates and Critical Accounting Policies



Telewests accounting policies are summarized in Note 4 to its consolidated financial statements. As stated above, Telewest prepares its consolidated financial statements in conformity with US GAAP, which
requires it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and
assumptions include capitalization of labor and overhead costs, impairment of goodwill and long-lived assets, and accounting for debt and financial instruments. Actual results could differ from those estimates.



Telewest considers the following policies to be the most critical accounting
policies in understanding the estimates, assumptions and judgments that are involved in preparing its financial statements and the uncertainties that could impact its results of operations, financial condition and cash flows:



| | · | revenue recognition;
| | - | --------------------



| | · | impairment of goodwill and long-lived assets;
| | - | ---------------------------------------------



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| | · | capitalization of labor and overhead costs; and
| | - | -----------------------------------------------



| | · | accounting for debt and financial instruments.
| | - | ----------------------------------------------



New Telewests financial statements will also reflect the impact of adopting fresh start accounting. See Accounting Impact of the
Financial RestructuringFresh Start Accounting.



In addition, the application of the going concern basis of accounting involves a range of subjective judgments, principally in relation to Telewests ability to service existing indebtedness through continued payment of interest due
and the sufficiency of resources to allow it to continue to operate in the ordinary course and thereby realize its assets and discharge its liabilities in the normal course of business for a period of 12 months following the date of the Independent
Auditors Report included elsewhere in this Annual Report. These judgments are discussed in more detail in Item 3. D. Risk Factors and below under the heading Liquidity and Capital Resources.



Revenue Recognition



Telewest applies the provisions of Statement of Financial Accounting
Standard, or SFAS, No. 51, Financial Reporting by Cable Television Companies in relation to connection and activation fees for cable television, as well as telephony and internet services, on the basis that it markets and
maintains a unified fiber network through which it provides all of these services. Consequently, those fees are recognized in the period of connection to the extent that those fees are less than direct selling costs. Any excess of connection and
activation fees over direct selling costs is deferred and amortized over the expected customer life.



Impairment of Goodwill and Long-Lived Assets



All long-lived assets, including goodwill and investments in unconsolidated affiliates, are evaluated for impairment on the basis of estimated undiscounted cash flows whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If an asset is determined to be impaired, it is written down to its estimated fair market value based on the best information available. Estimated fair market value is generally
measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows, and those estimates include inherent uncertainties, including those relating to the timing and amount of
future cash flows and the discount rate used in the calculation. Assumptions used in these cash flows are consistent with Telewests internal forecasts. If actual results differ from the assumptions used in the impairment review, Telewest may
incur additional impairment charges in the future.



Capitalization of
Labor and Overhead Costs



The telecommunications and
cable industries are highly capital-intensive and a large portion of Telewests resources is spent on capital activities. Judgment is sometimes required to determine whether a project is capital in nature and whether certain costs are directly
associated with a capital project. In particular, determining whether overhead is borne as a consequence of specific capital activities requires some judgment. The changing nature of the sectors in which Telewest operates and the nature of its
development activities will affect the appropriateness of its capitalization policy in the future.



Accounting for Debt and Financial Instruments



Telewest manages its risks associated with foreign exchange rates and interest rates and may use derivative financial instruments to hedge a portion of these risks. As a matter of policy, Telewest does not use
derivative financial instruments unless there is an underlying exposure and, therefore, it does not use derivative financial instruments for trading or speculative purposes. The evaluation of hedge effectiveness is subject to assumptions and
judgments based on the terms and timing of the underlying exposures. All derivative financial instruments are recognized in the consolidated balance sheet at fair value. The fair value of Telewests derivative financial instruments is generally
based on quotations from third-party financial institutions, which are market estimates of fair value that may differ from the amounts that might be realized if those instruments were monetized.



Results of Operations



Telewest
operates in two reportable segments: cable and content. The chief operating decision maker receives disaggregated financial and subscriber data for the cable segment covering telephony, television and internet product lines, while support, service
and network costs are compiled at the operating segment level. The internet product lines comprise internet sales and until November 2002, when the sales ceased, sales of cable publications. The content operating segment supplies TV programming to
the UK pay-TV broadcasting market and its operating results, which are naturally separate from the cable operating segment, are regularly reviewed by the chief operating decision maker. Revenues derived by the content segment from the cable segment
are eliminated on consolidation.



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Telewests financial condition and results of operations for the years ended December 31, 2000, 2001
and 2002, in each case based upon financial information prepared in accordance with US GAAP, are discussed below.



Comparison of Years Ended December 31, 2001 and 2002



Telewests consolidated revenue increased by £29 million or 2.3% from £1,254 million for the year ended December 31, 2001 to £1,283
million for the year ended December 31, 2002. This increase was attributable to growth in its cable segment (£52 million or 4.6%) offset by reduced revenues from its content segment (£23 million or 17.8%), mainly due to the disposal
of non-core businesses and the closure of ITV Digital. The growth in Telewests consumer sales division of its cable segment was also affected by a non-recurring charge of £16 million in respect of a Value Added Tax, or VAT,
adjustment charge against revenue. Excluding this non-recurring VAT adjustment, Telewests consolidated revenue would have increased by £45 million or 3.6%.



Telewest provided £16 million against revenue as a result of a VAT and Duties Tribunal judgment in a dispute over the
VAT status of its cable listings magazines. Previously, this was disclosed as a contingent liability. The amount arose from VAT which the VAT and Duties Tribunal ruled was incurred in the period from January 2000 to July 2002. Telewest appealed
against this ruling in the High Court in November 2003. The appeal was unsuccessful and Telewest has submitted a further appeal against the High Courts decision.



CABLE SEGMENT



Consumer Sales Division



Consumer sales division revenue represents a combination of cable television revenue, consumer cable telephony revenue, and internet and other income.



|                                          |  |                              |           |   |                              |   |           |                                 |  |       |   
|----------------------------------------- |  | ---------------------------- | --------- | - | ---------------------------- | - | --------- | ------------------------------- |  | ----- | --
|                                          |  | Year ended December 31, 2001 |           |   | Year ended December 31, 2002 |   |           | Percentage increase/ (decrease) | 
|Consumer Sales Division                   |  |                              |           |   |                              |   |           |                                 |  |       |   
|Revenue (in millions):                    |  |                              |           |   |                              |   |           |                                 |  |       |   
|Cable Television                          |  | £                            | 329       |   |                              | £ | 336       |                                 |  | 2.1   | % 
|Consumer Telephony                        |  |                              | 488       |   |                              |   | 495       |                                 |  | 1.4   | % 
|Internet and other                        |  |                              | 40        |   |                              |   | 63        |                                 |  | 57.5  | % 
|                                          |  |                              |           |   |                              |   |           |                                 |  |       |   
|Total Consumer Sales Division             |  | £                            | 857       |   |                              | £ | 894       |                                 |  | 4.3   | % 
|                                          |  |                              |           |   |                              |   |           |                                 |  |       |   
|Average monthly revenue per subscriber(1) |  | £                            | 40.03     |   |                              |   | £ 41.80   |                                 |  | 4.4   | % 
|Dual or triple penetration(2)             |  |                              | 69.0      | % |                              |   | 69.9      | %                               |  | 1.3   | % 
|Number of triple play subscribers(3)    |  |                              | 58,802    |   |                              |   | 183,143   |                                 |  | 211.5 | % 
|Percentage of triple play subscribers   |  |                              | 3.3       | % |                              |   | 10.4      | %                               |  | 215.2 | % 
|Total residential subscribers             |  |                              | 1,765,619 |   |                              |   | 1,758,625 |                                 |  | (0.4  | %)
|Household penetration                     |  |                              | 37.5      | % |                              |   | 37.4      | %                               |  | (0.3  | %)
|Average household churn(4)                |  |                              |          |   |                              |   | 18.2      | %                               |  |      |   

---

|(1) | Average monthly revenue per subscriber (often referred to as ARPU or Average Revenue per User) represents (i) the average monthly revenue of residential
subscribers for such period, divided by (ii) the average number of residential subscribers in such period.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Percentage of Telewests total customer base who take two or three of Telewests cable television, residential telephony and broadband internet services.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Triple play subscribers are those subscribers who take all of Telewests cable television, residential telephony and broadband internet services.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Average household churn for the period is calculated on a rolling twelve-month basis and represents (i) the total number of residential subscribers who disconnected or who were
disconnected during that period, divided by (ii) the average number of residential customers in that period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



---

Telewests consumer sales division revenue increased by £37 million or 4.3% from £857
million for the year ended December 31, 2001 to £894 million for the year ended December 31, 2002. This increase was attributable primarily to increases in average monthly revenue per subscriber coming from the growth of its successful
broadband products, increased multi-service penetration and selected price rises offset by a small decrease in the number of total homes connected and the £16 million VAT adjustment explained above. Excluding this non-recurring VAT adjustment,
Telewests consumer sales division revenue would have increased by £53 million or 6.2% to £910 million.



Excluding the non-recurring VAT adjustment, the increase in average monthly revenue per subscriber was attributable to an increase in dual or
triple-service subscribers, continued analog-to-digital migration and selected retail price increases in Telewests cable television and residential telephony services in July 2001, April 2002 and August 2002, offset in part by a decrease in
second line penetration and lower call volumes in residential telephony. Dual or triple-service subscriptions, which resulted from the continued market acceptance of combined cable television, telephony and broadband internet packages, grew
primarily as a result of an increase in the number of subscribers to Telewests blueyonder broadband internet services offset in part by increased product churn for cable television, telephony and dial-up internet services, as described below.



Total residential subscribers connected decreased marginally
mainly as a result of the continued effect of the selected price rises described below and the more rigorous enforcement of Telewests installation fee collection and disconnection policies in line with its objective of focusing on more
cash-generative customers. This decrease was largely offset by new subscribers to Telewests products, particularly its blueyonder broadband internet services.



Following price rises by its competitors, Telewest introduced selected price rises across its cable television, telephony
and dial-up internet product range in April 2002 and August 2002.



Although household churn in the year ended December 31, 2002 was 18.2%, it was 15.7% for the three-month period ended on that date.



Cable Television Revenue



Cable television revenue increased by £7 million or 2.1% from £329 million for the year ended December 31, 2001 to £336 million for
the year ended December 31, 2002. The increase was principally attributable to the continued migration of Telewests cable television subscribers from analog television to digital television and retail price increases introduced in 2001 and
2002, largely offset by a decline in cable television subscribers as a result of higher churn rates, and a fall in the amount of premium programming purchased by its subscribers.



|                                                               |  |                              |   |  |                              |   |  |                                 |   
|-------------------------------------------------------------- |  | ---------------------------- | - |  | ---------------------------- | - |  | ------------------------------- | --
|                                                               |  | Year ended December 31, 2001 |   |  | Year ended December 31, 2002 |   |  | Percentage increase/ (decrease) |   
|Cable Television                                               |  |                              |   |  |                              |   |  |                                 |   
|Cable television subscribersdigital                           |  | 723,826                      |   |  | 857,472                      |   |  | 18.5                            | % 
|Cable television subscribersanalog                            |  | 617,958                      |   |  | 436,339                      |   |  | (29.4                           | %)
|                                                               |  |                              |   |  |                              |   |  |                                 |   
|Total cable television subscribers                             |  | 1,341,784                    |   |  | 1,293,811                    |   |  | (3.6                            | %)
|                                                               |  |                              |   |  |                              |   |  |                                 |   
|Percentage of cable television subscribersdigital             |  | 53.9                         | % |  | 66.3                         | % |  | 23.0                            | % 
|Average monthly revenue per digital subscriber                 |  | £23.20                       |   |  | £22.70                       |   |  | (2.2                            | %)
|Average monthly revenue per analog subscriber                  |  | £18.98                       |   |  | £17.93                       |   |  | (5.5                            | %)
|Average monthly revenue per subscriber (analog and digital)(1) |  | £20.75                       |   |  | £20.82                       |   |  | 0.3                             | % 
|Product penetration(2)                                         |  | 28.5                         | % |  | 27.5                         | % |  | (3.5                            | %)
|Average cable television subscriber churn(3)                   |  | 18.7                         | % |  | 21.5                         | % |  | 15.0                            | % 

---

|(1) | Average monthly revenue per cable television subscriber for each period represents (i) the average monthly cable television revenue for that period, divided by (ii) the average
number of cable television subscribers in that period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Cable television penetration at a specified date represents (i) the total number of cable television subscribers at that date, divided by (ii) the total number of homes passed
and marketed for cable television at that date.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Average cable television subscriber churn rate for the period is calculated on a rolling twelve-month basis and represents (i) the total number of cable television subscribers who
terminated basic services or whose services were terminated during that period, divided by (ii) the average number of cable television subscribers in that period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, 2002, Telewests digital television services had been rolled out in all franchise areas, excluding
its Eurobell South-East areas and its Cabletime areas. As a result of this substantially completed roll-out, Telewests cable television customers continued to migrate from its analog services to its digital services, where they generated
higher monthly revenues. The migration of analog customers to digital slowed during the



25



---

year ended December 31, 2002 compared with the previous year. Telewest expects this trend to continue throughout 2003 as a result of its increased focus on
cash and cost control, including reduced marketing activity in respect of its digital cable television services and the decreased size of its analog customer base.



Total cable television subscribers connected decreased largely as a result of higher churn rates experienced following the
price increases described above.



During the year ended
December 31, 2002, Telewest experienced a fall in the amount of premium programming purchased by its subscribers. Telewests premium-to-basic ratio (which measures units of premium programming as a percentage of its basic television
subscriber base) fell from 80% as at December 31, 2001 to 72% as at December 31, 2002.



Average monthly revenue for digital cable television subscribers declined principally as a result of the change in the mix between premium and basic packages described above. For example, approximately 75% of
Telewests digital television subscribers during the year ended December 31, 2002 took basic only packages compared to approximately 69% of subscribers during the year ended December 31, 2001.



Consumer Telephony Revenue



Consumer telephony revenue increased by £7 million or 1.4% from
£488 million for the year ended December 31, 2001 to £495 million for the year ended December 31, 2002. The increase in consumer telephony revenue was primarily due to an increase in average revenue per line, offset in part by a decrease
in the total number of residential telephony lines.



|                                                       |  |                             |   |  |                             |   |  |                                 |   
|------------------------------------------------------ |  | --------------------------- | - |  | --------------------------- | - |  | ------------------------------- | --
|                                                       |  | Year ended December 31,2001 |   |  | Year ended December 31,2002 |   |  | Percentage increase/ (decrease) |   
|Consumer Telephony                                     |  |                             |   |  |                             |   |  |                                 |   
|3-2-1 subscribers                                      |  | 1,461,243                   |   |  | 1,253,662                   |   |  | (14.2                           | %)
|Total Talk subscribers(1)                              |  | 154,566                     |   |  | 360,662                     |   |  | 133.3                           | % 
|                                                       |  |                             |   |  |                             |   |  |                                 |   
|Total residential telephony subscribers(2)             |  | 1,615,809                   |   |  | 1,614,324                   |   |  | (0.1                            | %)
|                                                       |  |                             |   |  |                             |   |  |                                 |   
|Residential telephony penetration                      |  | 34.3                        | % |  | 34.4                        | % |  | 0.3                             | % 
|Residential telephone lines                            |  | 1,762,312                   |   |  | 1,717,191                   |   |  | (2.6                            | %)
|Second line penetration                                |  | 9.1                         | % |  | 6.4                         | % |  | (29.7                           | %)
|Average residential telephony subscriber churn rate(3) |  | 16.5                        | % |  | 17.3                        | % |  | 4.8                             | % 
|Average monthly revenue per line(4)                    |  | £22.79                      |   |  | £23.16                      |   |  | 1.6                             | % 
|Average monthly revenue per subscriber(5)              |  | £25.09                      |   |  | £24.92                      |   |  | (0.7                            | %)

---

|(1) | Includes subscribers to Telewests Talk Unlimited, Talk International and Talk Evening and Weekends flat rate telephony services.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(2) | Residential telephony penetration at a specified date represents (i) the total number of residential cable telephony subscribers at that date, divided by (ii) the total
number of homes passed and marketed for residential cable telephony at that date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Average residential telephony subscriber churn rate for the period is calculated on a rolling twelve-month basis and represents (i) the total number of residential cable
telephony subscribers who terminated telephony services or whose services were terminated during that period, divided by (ii) the average number of residential cable telephony subscribers in that period.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Average monthly revenue per residential telephony line for each period represents (i) the average monthly residential cable telephony revenue for that period, divided by
(ii) the average number of residential cable telephony lines in that period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Average monthly revenue per residential telephony subscriber for each period represents (i) the average monthly residential cable telephony revenue for that period,
divided by (ii) the average number of residential cable telephony subscribers in that period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Average monthly revenue per line increased, despite a small decrease in average monthly revenue per subscriber, principally as a result of selected price
increases and the continued success of Telewests unmetered telephony product, Talk Unlimited which together contributed approximately £1.01 to the increase. This was offset in part by a £0.64 reduction resulting from declining call
volumes, principally as a result of the substitution of mobile calls for fixed line calls, a decrease in second line penetration and the transfer of telephony traffic for calls made by its subscribers to a large internet service provider, from its
consumer sales division to its carrier services unit, which will now be billed at a flat rate rather than on a per-minute basis.



The decrease in the number of residential telephony subscribers resulted principally from an increase in customer churn following price rises in July 2001
and April 2002, offset in part by the impact of the increased penetration of Telewests Talk Unlimited product. The decrease in the number of residential telephony lines resulted primarily from a decrease in second lines during the year.



Internet and Other Revenue



Internet and other revenue, which arises wholly in Telewests consumer
sales division, increased by £23 million or 57.5% from £40 million in the year ended December 31, 2001 to £63 million in the year ended December 31, 2002. The increase was due to an increase in internet income (principally as a
result of the continued success of



26



---

its high-speed internet products, as described below) offset in part by the £16 million VAT adjustment described above which was recorded in other
revenue. Excluding this non-recurring adjustment, internet and other revenue would have increased by £39 million or 97.5% to £79 million.



Other revenues (derived from the sales of cable television publications) declined by £4 million from £9 million at December 31, 2001 to
£5 million at December 31, 2002, principally as a result of lower sales in advance of the cessation of this sales activity in November 2002.



|                                          |  |                              |   |  |                              |   |  |                                 |   
|----------------------------------------- |  | ---------------------------- | - |  | ---------------------------- | - |  | ------------------------------- | --
|                                          |  | Year ended December 31, 2001 |   |  | Year ended December 31, 2002 |   |  | Percentage increase/ (decrease) |   
|Internet Subscribers                      |  |                              |   |  |                              |   |  |                                 |   
|Blueyonder broadband                      |  | 85,122                       |   |  | 262,219                      |   |  | 208.1                           | % 
|Blueyonder SurfUnlimited                  |  | 184,034                      |   |  | 193,201                      |   |  | 5.0                             | % 
|Blueyonder pay-as-you-go                  |  | 119,295                      |   |  | 85,025                       |   |  | (28.7                           | %)
|                                          |  |                              |   |  |                              |   |  |                                 |   
|Total internet subscribers                |  | 388,451                      |   |  | 540,445                      |   |  | 39.1                            | % 
|                                          |  |                              |   |  |                              |   |  |                                 |   
|Blueyonder Broadband                      |  |                              |   |  |                              |   |  |                                 |   
|Average subscriber churn rate(1)          |  | 7.5                          | % |  | 12.4                         | % |  | 65.3                            | % 
|Average monthly revenue per subscriber(2) |  | £25.21                       |   |  | £25.12                       |   |  | (0.4                            | %)

---

|(1) | Average blueyonder broadband internet subscriber churn rate for the period is calculated on a rolling twelve-month basis and represents (i) the total number of blueyonder broadband
internet subscribers who terminated their services or whose services were terminated during that period, divided by (ii) the average number of blueyonder broadband internet subscribers in that period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Average monthly revenue per blueyonder broadband internet subscriber for each period represents (i) the average monthly blueyonder broadband internet revenue for that period,
divided by (ii) the average number of blueyonder broadband internet subscribers in that period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Internet income increased by £43 million or 138.7% from £31 million as at December 31, 2001 to £74 million as at December 31, 2002. This
increase resulted from an increase in the number of internet subscribers and the continued success of Telewests broadband internet products.



Telewest began marketing its 512 Kb broadband internet service for home personal computers, blueyonder broadband internet, on a national basis
from the start of 2001, and on June 17, 2002 it announced the launch of its new 1Mb blueyonder broadband internet service. At December 31, 2002, Telewest had 26,676 subscribers to its 1Mb service.



During the period ended December 31, 2002, Telewests blueyonder
broadband internet customers significantly contributed to the growth in its average monthly revenue with 183,143 customers or 69.8% of its blueyonder broadband internet customers also taking both cable television and telephony services and 93%
taking at least one other service. Triple play subscribers to all three of Telewests blueyonder broadband internet, telephony and cable television services had an average monthly revenue of approximately £67 as at December
31, 2002. Blueyonder broadband internet was also successful in attracting new customers to Telewest, with 33% of broadband internet installations being performed for subscribers who are new to Telewest. Blueyonder broadband internet churn increased
in the twelve-month period ended December 31, 2002 from 7.5% to 12.4% as some of its customers, who were initially attracted by promotions, discontinued their service.



Dial-up internet subscribers to Telewests SurfUnlimited product, which provides unmetered internet access for a flat
fee, together with its pay-as-you-go metered internet service, decreased as subscribers continued to migrate to Telewests blueyonder broadband internet service. As a result of this migration, 28% of the broadband customers added during 2002
were upgrades from SurfUnlimited. The price of Telewests metered blueyonder pay-as-you-go internet service was raised from 1.5 pence to 2 pence per minute to encourage these subscribers to upgrade to an unmetered service.



Business Sales Division



Business sales division revenue is derived from the delivery of business
communications solutions through a combination of voice, data and managed solutions services.



|                                                   |  |                             |        |                            |   |                                 |  |      |   
|-------------------------------------------------- |  | --------------------------- | ------ | -------------------------- | - | ------------------------------- |  | ---- | --
|                                                   |  | Year ended December 31,2001 |        | Year endedDecember 31,2002 |   | Percentage increase/ (decrease) | 
|Business Sales Division                            |  |                             |        |                            |   |                                 |  |      |   
|Revenue (in millions)                              |  | £                           | 268    |                            | £ | 283                             |  | 5.6  | % 
|                                                   |  |                             |        |                            |   |                                 |  |      |   
|Business customer accounts                         |  |                             | 72,934 |                            |   | 73,746                          |  | 1.1  | % 
|Average annualized revenue per customer account(1) |  |                             | £3,137 |                            |   | £3,114                          |  | (0.7 | %)

---

|(1) | Average annualized revenue per customer account represents (i) the average monthly business services revenue for the 12 months to the end of the relevant period, (ii)
divided by the average number of business sales division customers in that period, and (iii) multiplied by 12.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



---

The increase in business sales division revenue resulted from increased revenues from voice and data
services, primarily from small-to-medium sized enterprises, or SMEs, and from Telewests carrier services unit, offset in part by a decrease in average annualized revenue per customer account from its business customers.



The increase in revenues from voice and data services resulted primarily from
an increase in the number of business customers accounts using these services.



The marginal decrease in average annualized revenue per customer account was due primarily to increased price competition in the marketplace.



The business sales division continues to benefit from growth in the provision of data services across all market segments
with the launch of an internet protocol virtual private networka secure and scalable private network solution that enables companies to send voice, video and data through one single, efficient connection. For example, The Scotsman
newspaper extended its existing contract with Telewest for another three years and is taking additional data services, including internet protocol virtual private network with multi-protocol label switching across various sites.



Telewests carrier services unit, which provides its fiber optic
National Network to other carriers and operators (for example T-Mobile, a mobile telephone company), contributed £58 million of revenue for the year ended December 31, 2002 compared with £52 million for the year ended December 31, 2001.
Revenue in the year ended December 31, 2002 benefited from the recognition of £8 million from an Atlantic Telecommunications contract, previously deferred and being recognized over 20 years. In 2002, Atlantic Telecommunications was placed in
administration and, as a result, Telewest was released from the terms of this contract, allowing it to credit the deferred revenue in the current year. There was no cash impact from this accounting treatment.



CONTENT SEGMENT



Content Segment Revenue



Content segment revenue is derived principally from advertising and
subscription revenue derived from the provision of content to the UK pay-TV broadcasting market through Telewests content production subsidary, Flextech.



|                                               |  |                            |   |  |                            |   |  |                               |   
|---------------------------------------------- |  | -------------------------- | - |  | -------------------------- | - |  | ----------------------------- | --
|                                               |  | Year endedDecember 31,2001 |   |  | Year endedDecember 31,2002 |   |  | Percentageincrease/(decrease) |   
|                                               |  | (in millions)              |  
|Content Segment                                |  |                            |   |  |                            |   |  |                               |   
|Subscription revenue                           |  | £            33            |   |  | £          33              |   |  |                              |   
|Advertising revenue                            |  | £            38            |   |  | £          42              |   |  | 10.5                          | % 
|Net revenue(1)                                 |  | £          129             |   |  | £        106               |   |  | (17.8                         | %)
|Number of homes receiving Telewest programming |  | 7.5                        |   |  | 8.5                        |   |  | 13.3                          | % 
|Share of the net profits of UKTV               |  | £              3           |   |  | £          17              |   |  | 466.7                         | % 
|UK television advertising market share         |  | 3.0                        | % |  | 3.4                        | % |  | 13.3                          | % 



---

|(1) | Net revenue consists of total revenue (subscription revenue, advertising revenue, management fees, transactional and interactive revenue and other revenue) less
inter-segmental revenues of £14 million for the year ended December 31, 2001 and £15 million for the year ended December 21, 2002.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



After the elimination of inter-segmental revenues of £14 million and £15 million for the years ended December 31, 2001 and 2002, respectively,
the net revenue of Flextech, Telewests content segment, decreased during the period. Before this elimination of inter-segmental trading between Flextech and Telewest, Flextechs revenue decreased by £22 million or 15.4% from
£143 million for the year ended December 31, 2001 to £121 million for the year ended December 31, 2002.



Flextechs decrease in net revenue was principally as a result of a non-recurring grant received from the UK government in 2001, the termination of
BSkyBs analog television service in 2001, and discontinued revenue streams from businesses that were disposed of, offset in part by an increase in advertising revenue.



The year ended December 31, 2001 included a £4 million UK government grant payment in respect of the trial of Living
Health, Telewests broadband interactive television health service, and revenues of approximately £7 million from HSN Direct International Limited and Screenshop Limited which were disposed of during that year. The period also included
revenues of £3 million from the sale of spare analog transponder capacity to BSkyB, which discontinued its analog services during 2001.



28



---

The increase in the number of homes receiving programming from Telewests content segment resulted
principally from former ITV Digital subscribers migrating to platforms carrying Flextech programming. None of the content segments wholly owned channels were carried on the ITV Digital platform which was closed in April 2002.



Advertising revenue increased 10.5% despite a market that saw only a 5%
overall rise. The content segments advertising revenue performance derives from the relative viewing strength of its channels, with its share in pay-television homes growing from 6.1% to 6.6% and its share of basic viewing remaining stable at
20.4% in spite of increased competition in the multi-channel market.



Telewests content segments share of the net profits of UKTV (its joint venture with BBC Worldwide) is included in share of net losses of affiliates.



COMBINED CABLE AND CONTENT SEGMENTS



Operating Costs and Expenses



|                                           |  |                              |  |                             |  |                               |   
|------------------------------------------ |  | ---------------------------- |  | --------------------------- |  | ----------------------------- | --
|Operating Costs and Expenses               |  | Year ended December 31, 2001 |  | Year endedDecember 31, 2002 |  | Percentageincrease/(decrease) |   
|                                           |  | (in millions)                | 
|Cable programming expenses                 |  | £   142                      |  | £   128                     |  | (9.9                          | %)
|Cable telephony expenses                   |  | 235                          |  | 218                         |  | (7.2                          | %)
|Content segment expenses                   |  | 83                           |  | 70                          |  | (15.7                         | %)
|Depreciation                               |  | 469                          |  | 495                         |  | 5.5                           | % 
|Impairment of fixed assets                 |  |                             |  | 841                         |  |                              |   
|                                           |  |                              |  |                             |  |                               |   
|Total expenses                             |  | £   929                      |  | £1,752                      |  | 88.6                          | % 
|Selling, general and administrative (SG&A) |  | 497                          |  | 526                         |  | 5.8                           | % 
|Amortization of goodwill                   |  | 183                          |  |                            |  |                              |   
|Impairment of goodwill                     |  | 766                          |  | 1,445                       |  | 88.6                          | % 
|                                           |  |                              |  |                             |  |                               |   
|Total Operating Costs and Expenses         |  | £2,375                       |  | £3,723                      |  | 56.8                          | % 
|                                           |  |                              |  |                             |  |                               |   



Telewests
operating costs and expenses, before depreciation, impairment of fixed assets, amortization and impairment of goodwill decreased due to reduced cable programming expenses, cable telephony expenses, and content segment expenses, offset in part by
increases in SG&A principally caused by higher payroll costs due to its reorganization redundancy program and higher legal and professional costs associated with the Financial Restructuring.



Cable programming expenses decreased principally as the result of lower
programming costs resulting from an increase in the number of Telewests television subscribers choosing to subscribe to packages with fewer or no premium channels and favorable renegotiations with certain programmers for content contracts.
These decreases were partly offset by increased costs of programming for Telewests digital television packages, which have more channels than its analog packages.



Decreases in cable telephony expenses resulted from improving rerouting of traffic to least-cost providers, a reduction in
termination rates for certain calls, an improvement in the mix of telephony revenue and the non-recurrence of £7 million of cost relating to the carrier services unit expensed in 2001.



The content segments expenses consist principally of amortization costs
of programming shown on its television channels and the costs of advertising sales those channels receive. The decrease in the content segments cost of sales resulted from lower costs following the closure of transactional businesses in 2001 and
2002 and the costs of a non-recurring sale of programming rights in 2001. The content segments cost of sales was 57.9% of the content segments revenues (including inter-segmental sales to Telewest) for the year ended December 31, 2002
compared with 58.0% on the same basis for the year ended December 31, 2001.



The increase in depreciation expenses is primarily attributable to additional expenditure for the installation of new subscribers and the upgrade of parts of Telewests network. In addition, a charge for
impairment of fixed assets amounting to £841 million was recorded in the year ended December 31, 2002 (£0 in 2001) which will result in reduced depreciation expenses going forward as these assets will no longer be depreciated (see below
Impairment of Assets).



The increase in
SG&A primarily reflected the net increase in employment costs due to redundancy charges associated with an employee reduction program (offset in part by reductions in payroll costs from decreasing numbers of employees), together with legal and
professional costs relating to Telewests Financial Restructuring and increased expense associated with the marketing of its broadband and digital products, and was partially offset by decreases in other overhead expenses as Telewest continues
to achieve cost efficiencies.



Redundancy costs incurred in
respect of the reorganization during the year ended December 31, 2002 were approximately £25 million. Legal and professional costs incurred to that date in relation to Telewests Financial Restructuring were approximately £22
million. Excluding these redundancy and legal and professional costs,



29



---

SG&A would have decreased by £18 million or 3.6% for the year ended December 31, 2002. SG&A increased as a percentage of total operating costs,
before depreciation, impairment of fixed assets, amortization and impairment of goodwill from 51.9% for the year ended December 31, 2001 to 55.8% for the year ended December 31, 2002 (and excluding the redundancy and legal and professional costs
discussed above, increased to 53.5% on the same basis). Staff costs increased to £275 million for the year ended December 31, 2002 from £257 million for the year ended December 31, 2001, reflecting the redundancy costs associated with
the reduction in staffing levels discussed above, offset in part by decreased ongoing payroll costs.



Under SFAS 142, effective from January 1, 2002, goodwill arising from business combinations and intangible assets with indefinite lives is no longer
amortized but is subject to annual review for impairment (or more frequently should indications of impairment arise). Goodwill associated with equity-method investments will also no longer be amortized under SFAS 142 but will be subject to
impairment testing as part of the investment to which it relates in accordance with APB 18. Accordingly, there was no charge for amortization of goodwill in the year ended December 31, 2002 compared to a charge of £183 million for the year
ended December 31, 2001. Following asset impairment reviews in both 2002 and 2001, impairment of goodwill was recorded at £1,445 million for the year ended December 31, 2002 compared with £766 million for the year ended December 31, 2001
(see the text below under the heading Impairment of Assets).



Other Income/(Expense)



|                                                           |  |                              |  |                                       |  |                              
|---------------------------------------------------------- |  | ---------------------------- |  | ------------------------------------- |  | -----------------------------
|                                                           |  | Year ended December 31, 2001 |  | Year ended December 31, 2002 Restated |  | Percentageincrease/(decrease)
|Other income/(expense)                                     |  | (in millions)               
|Interest income                                            |  | £15                          |  | £19                                   |  | 26.7%                        
|Interest expense (including amortization of debt discount) |  | (487)                        |  | (528)                                 |  | 8.4%                         
|Foreign exchange gains, net                                |  |                             |  | 213                                   |  |                             
|Share of net losses of affiliates and impairment           |  | (216)                        |  | (118)                                 |  | (45.4%)                      
|Minority interest in losses of subsidiaries, net           |  | 1                            |  | 1                                     |  |                             
|Other, net                                                 |  | (3)                          |  | 36                                    |  |                             
|                                                           |  |                              |  |                                       |  |                              
|Total other income/(expense), net                          |  | £(690)                       |  | £(377)                                |  | (45.4%)                      
|                                                           |  |                              |  |                                       |  |                              



In April 2002, the
FASB issued SFAS 145, Rescission of FASB Statements 4, 44 and 64, Amendment of FASB 13, and Technical Corrections. SFAS 145 provides for the rescission of several previously issued accounting standards, new accounting guidance for the
accounting for various lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. Telewest adopted this standard from January 1, 2002, and reclassified £15 million from extraordinary
items to interest expense for the year ended December 31, 2001. Consequently, the comparative amounts for other income/expense, net, and interest expense have been reclassified in the following text.



Other income/expense, net, before taxation totalled £377 million for
the year ended December 31, 2002 and £690 million for the year ended December 31, 2001, a decrease of £313 million or 45.4%. This net decrease resulted from an increase in foreign exchange gains, net, an increase in interest income, a
decrease in Telewests share of net losses of affiliated companies and impairment, and an increase in other profits, offset by an increase in interest expense.



Higher interest income was generated from the higher cash balances held by Telewest during the year ended December 31, 2002
as a result of unwinding certain foreign exchange contracts and drawdowns under Telewests existing senior secured credit facility in advance of funding requirements.



30



---

£28 million of the increase in interest expense was primarily as a result of the additional
borrowing under Telewests bank facilities to fund the continued roll-out of digital television and broadband internet products and for general working capital purposes. Additionally, £11 million of the increase arose on the write-off of
deferred financing costs of debentures as a consequence of all notes and debentures being in default and payable on demand as at December 31, 2002.



Foreign exchange gains, net, were the result of the US dollar significantly weakening against the pound sterling during the year ended December 31, 2002.
In the previous year, Telewests US dollar-denominated debt was substantially hedged. Following the termination of all of its derivative arrangements, Telewest now has a significantly higher proportion of unhedged US dollar-denominated
liabilities that have been translated at period-end exchange rates contributing to higher foreign exchange gains as the US dollar has weakened against the pound sterling.



In the three-month period ended March 31, 2002, Telewest determined that it was probable that forecasted future prepayments
of principal against outstanding US dollar-denominated debt would not occur. Accordingly, the cumulative adjustment in OCI of £53 million resulting from marking to market the derivative instruments was reclassified from OCI to foreign exchange
gains in the statement of operations. Subsequent adjustments of the carrying value of these instruments to fair value are taken directly to the statement of operations as they are incurred.



Telewests share of net losses of its affiliated companies and
impairment was £118 million for the year ended December 31, 2002 compared with £216 million net losses for the year ended December 31, 2001. Telewests share of the net losses of its affiliated companies and impairment in each of
the years 2001 and 2002 resulted principally from the impairment of its investments in UKTV and SMG, described below. Telewests principal affiliated companies as at December 31, 2002 included UK Gold Holdings Limited, UK Channel Management
Limited and Front Row Television Limited.



Other
profits/losses, including minority interests in subsidiaries, net, amounted to a net profit of £37 million for the year ended December 31, 2002 compared with a net loss of £2 million in the year ended December 31, 2001. The net profit of
£37 million arose primarily as a result of gains of £33 million arising on the disposal of Telewests investments in its subsidiary The Way Ahead Group Limited and in an affiliated company, TV Travel Group Limited.



Impairment of Assets



During the years ended December 31, 2002 and 2001, Telewest undertook
impairment reviews of its network assets, of goodwill arising on recent acquisitions and of its investments in affiliates acquired in recent years. The reviews covered Telewests cable and content reporting units. The principal reasons for the
reviews were: a share price decline indicative of a fall in the values of the underlying assets and a softening of the advertising sales market, declining revenue growth and a lower than expected take-up by customers of additional services.



The review in 2002 found evidence of impairment in the value
of goodwill arising on the core cable and content reporting unit businesses, the carrying value of network assets and in the value of the affiliated undertaking UKTV. The review in 2001 indicated impairment in the value of goodwill arising in the
core content reporting unit business and the investments in the two affiliates, UKTV and SMG. No impairment in the carrying value of the network assets was required in 2001. As a result of the reviews, the carrying amounts of goodwill, fixed assets
and the investments in the affiliated undertakings were written down to fair value, resulting in a charge of £1,445 million against goodwill (£766 million in 2001), an impairment of £841 million against fixed assets (£0 in
2001) and a charge of £88 million against the investments in affiliates (£202 million in 2001). These charges have been included in the statement of operations within impairment of goodwill, impairment of fixed assets, and share of net
losses of affiliates and impairment, respectively. The estimated fair value of the goodwill and the investment in UKTV was based on projected future cash flows at a post-tax discount rate of 11.5%, which Telewest believed was commensurate with the
risks associated with the assets. The projected future cash flows were determined using Telewests then current long-range plan for the business, with a terminal value which takes into account analysts and other published projections of
future trends across pay-television platforms, including the total television advertising market.



31



---

Comparison of Years Ended December 31, 2000 and 2001



Flextech was acquired on April 19, 2000 and consolidated into Telewests
business from that date. Consequently, its results are included in the statements of operations and cash flows for the year ended December 31, 2001 and in respect of the year ended December 31, 2000 from April 19, 2000.



Eurobell was acquired on November 1, 2000 and consolidated into
Telewests business from that date. Consequently, its results are included in the statements of operations and cash flows for the year ended December 31, 2001 and in respect of the year ended December 31, 2000 from November 1, 2000.



Telewests consolidated revenue increased by £185
million or 17.3% from £1,069 million for the year ended December 31, 2000 to £1,254 million for the year ended December 31, 2001. This increase was attributable to revenue increases in consumer cable television and telephony and its
business sales division and the full-year impact of Telewests merger with Flextech in April of 2000 (approximately £48 million) and the Eurobell acquisition (approximately £58 million).



CABLE SEGMENT



Consumer Sales Division



|                                        |  |                             |           |   |                             |   |           |                                 |  |         |  
|--------------------------------------- |  | --------------------------- | --------- | - | --------------------------- | - | --------- | ------------------------------- |  | ------- | -
|                                        |  | Year endedDecember 31, 2000 |           |   | Year endedDecember 31, 2001 |   |           | Percentage increase/ (decrease) | 
|Consumer Sales Division                 |  |                             |           |   |                             |   |           |                                 |  |         |  
|Revenue (in millions):                  |  |                             |           |   |                             |   |           |                                 |  |         |  
|Cable Television                        |  | £                           | 279       |   |                             | £ | 329       |                                 |  | 17.9    | %
|Consumer Telephony                      |  |                             | 445       |   |                             |   | 488       |                                 |  | 9.7     | %
|Internet and other                      |  |                             | 16        |   |                             |   | 40        |                                 |  | 150.0   | %
|                                        |  |                             |           |   |                             |   |           |                                 |  |         |  
|Total Consumer Sales Division           |  | £                           | 740       |   |                             | £ | 857       |                                 |  | 15.8    | %
|                                        |  |                             |           |   |                             |   |           |                                 |  |         |  
|Average monthly revenue per subscriber  |  |                             | £37.45    |   |                             |   | £40.03    |                                 |  | 6.9     | %
|Dual or triple penetration              |  |                             | 64.8      | % |                             |   | 69.0      | %                               |  | 6.5     | %
|Number of triple play subscribers     |  |                             | 4,629     |   |                             |   | 58,802    |                                 |  | 1,170.3 | %
|Percentage of triple play subscribers |  |                             | 0.3       | % |                             |   | 3.3       | %                               |  | 1000.0  | %
|Total residential subscribers           |  |                             | 1,691,341 |   |                             |   | 1,765,619 |                                 |  | 4.4     | %
|Household penetration                   |  |                             | 35.3      | % |                             |   | 37.5      | %                               |  | 6.2     | %



Telewests
consumer sales division revenue increased by £117 million or 15.8% from £740 million for the year ended December 31, 2000 to £857 million for the year ended December 31, 2001. This increase was attributable to the full-year impact
of the acquisition of Eurobell (approximately £41 million), an increase in customer homes connected and an increase in average monthly revenue per household.



The increase in residential subscribers resulted particularly from the impact of Telewests blueyonder broadband
high-speed internet product, the launch of its Active Digital services, the launch of its Talk Unlimited telephony product and lower churn rates experienced throughout 2001.



The increase in average monthly revenue per subscriber was attributable to an increase in dual or triple-service
subscribers, higher call volumes in residential telephony, higher subscriber revenues generated by Active Digital versus analog television services and retail price increases in Telewests basic cable telephony prices in July 2001.



Cable Television Revenue



Cable television revenue increased by £50 million or 17.9% from
£279 million for the year ended December 31, 2000 to £329 million for the year ended December 31, 2001. The increase was principally attributable to the full-year impact of the Eurobell acquisition (approximately £10 million),
an increase in the number of cable television subscribers connected, retail price increases introduced on July 1, 2001, higher monthly revenues per subscriber generated by Telewests Active Digital services, and lower churn rates experienced
during the year ended December 31, 2001 compared with 2000, offset in part by lower subscriber revenues from its analog services.



32



---

|                                                           |  |                             |   |  |                             |   |  |                                 |   
|---------------------------------------------------------- |  | --------------------------- | - |  | --------------------------- | - |  | ------------------------------- | --
|                                                           |  | Year endedDecember 31, 2000 |   |  | Year endedDecember 31, 2001 |   |  | Percentage increase/ (decrease) |   
|Cable Television                                           |  |                             |   |  |                             |   |  |                                 |   
|Cable television subscribersdigital                       |  | 339,195                     |   |  | 723,826                     |   |  | 113.4                           | % 
|Cable television subscribersanalog                        |  | 910,415                     |   |  | 617,958                     |   |  | (32.1                           | %)
|                                                           |  |                             |   |  |                             |   |  |                                 |   
|Total cable television subscribers                         |  | 1,249,610                   |   |  | 1,341,784                   |   |  | 7.4                             | % 
|                                                           |  |                             |   |  |                             |   |  |                                 |   
|Percentage of cable television subscribersdigital         |  | 27.1                        | % |  | 53.9                        | % |  | 98.9                            | % 
|Average monthly revenue per digital subscriber             |  | £26.11                      |   |  | £23.20                      |   |  | (11.1                           | %)
|Average monthly revenue per analog subscriber              |  | £18.65                      |   |  | £18.98                      |   |  | 1.8                             | % 
|Average monthly revenue per subscriber(analog and digital) |  | £19.50                      |   |  | £20.75                      |   |  | 6.4                             | % 
|Product penetration                                        |  | 26.1                        | % |  | 28.5                        | % |  | 9.2                             | % 
|Average cable television subscriber churn                  |  | 26.0                        | % |  | 18.7                        | % |  | (28.1                           | %)



The increase in total
cable television subscribers resulted from the continued introduction of Active Digital and lower churn rates experienced in the year ended December 31, 2001 compared to 2000.



At December 31, 2001, approximately 27% of Telewests digital households had set up, a television e-mail
account, and approximately 142,000 customers had purchased keyboards for use with its interactive services.



The increase in average monthly revenue per cable television subscriber was primarily due to an increase in the number of Telewests Active Digital
subscribers and price rises across its basic packages which were introduced from July 1, 2001 (Telewests entry package, which included digital television, telephone line rental, interactive services and television e-mail, increased from
£9.00 to £9.60 while other basic television packages increased on average by £2.00 each). This was offset in part by an increased percentage of subscribers choosing lower-priced service offerings. Average monthly revenue for
digital cable television subscribers was £23.20 for the year ended December 31, 2001 compared with £18.98 for analog cable television subscribers.



Product penetration increased as a result of improved customer take-up of Active Digital packages and a reduction in churn throughout the year.
Telewest believes that this reduction in churn was principally attributable to a reduction in Telewests digital television fault rate, improved customer satisfaction with its products, services and pricing, and improvements in its customer
service.



Consumer Telephony Revenue



Consumer telephony revenue increased by £43 million or 9.7% from
£445 million at December 31, 2000 to £488 million at December 31, 2001. The increase in consumer telephony revenue was primarily due to the full-year impact of the Eurobell acquisition (approximately £31 million) and increases in
the number of residential telephony subscribers and lines, offset in part by marginal decreases in average monthly revenue.



|                                                    |  |                            |  |                            |  |                              
|--------------------------------------------------- |  | -------------------------- |  | -------------------------- |  | -----------------------------
|                                                    |  | Year endedDecember 31,2000 |  | Year endedDecember 31,2001 |  | Percentageincrease/(decrease)
|Consumer Telephony                                  |  |                            |  |                            |  |                              
|3-2-1 subscribers                                   |  | 1,538,140                  |  | 1,461,243                  |  | (5.0%)                       
|Total Talk subscribers                              |  |                           |  | 154,566                    |  |                             
|                                                    |  |                            |  |                            |  |                              
|Total residential telephony subscribers             |  | 1,538,140                  |  | 1,615,809                  |  | 5.0%                         
|                                                    |  |                            |  |                            |  |                              
|Residential telephony penetration                   |  | 32.2%                      |  | 34.3%                      |  | 6.5%                         
|Residential telephone lines                         |  | 1,706,159                  |  | 1,762,312                  |  | 3.3%                         
|Second line penetration                             |  | 10.9%                      |  | 9.1%                       |  | (16.5%)                      
|Average residential telephony subscriber churn rate |  | 19.8%                      |  | 16.5%                      |  | (16.7%)                      
|Average monthly revenue per line                    |  | £22.92                     |  | £22.79                     |  | (0.6%)                       
|Average monthly revenue per subscriber              |  | £25.54                     |  | £25.09                     |  | (1.8%)                       



The increases in the
number of residential telephony subscribers and residential lines resulted from the impact of the take-up of Telewests telephony product Talk Unlimited, and a decrease in product churn both leading to higher product penetration. Talk Unlimited
was launched in May 2001.



33



---

Telewest believes the reduction in the average subscriber churn rate is principally attributable to
improved customer satisfaction with its products, services and pricing, and improvements in Telewests customer service.



Second line penetration decreased in part due to price increases for second lines during the year ended December 31, 2001 and the migration of dial-up
internet subscribers to Telewests blueyonder broadband internet service.



Although average call volume increased by approximately 34% year on year, Telewests average revenue per minute decreased by approximately 26% over the same period. Telewest benefited from a then new increased
price structure known as 3-2-1-Free and a growing number of calls made to mobile operators which boosted telephony revenue per minute. However, these factors were more than offset by the effects of price competition on its telephony
charges and a change in the mix of calls made by its telephony subscribers, particularly the increases in the percentage of calls made to internet service providers at lower rates (or at no charge in the case of its own SurfUnlimited subscribers)
which increased by approximately 110% year on year, and free cable-to-cable local calls, which increased by approximately 8% since December 31, 2000.



Internet and Other Revenue



Internet and other revenue, which arose wholly in Telewests consumer sales division, increased by £24 million or 150% from £16 million
in the year ended December 31, 2000 to £40 million in the year ended December 31, 2001. This increase was due entirely to an increase in internet income.



Other revenues were derived from the sale of cable publications and contributed £9 million of revenues in both 2001 and 2000.



|                                       |  |                            |  |                            |   |  |                               |   
|-------------------------------------- |  | -------------------------- |  | -------------------------- | - |  | ----------------------------- | --
|                                       |  | Year endedDecember 31,2000 |  | Year endedDecember 31,2001 |   |  | Percentageincrease/(decrease) |   
|Internet Subscribers                   |  |                            |  |                            |   |  |                               |   
|Blueyonder broadband                   |  | 6,893                      |  | 85,122                     |   |  | 1134.9                        | % 
|Blueyonder SurfUnlimited               |  | 104,983                    |  | 184,034                    |   |  | 75.3                          | % 
|Blueyonder pay-as-you-go               |  | 175,387                    |  | 119,295                    |   |  | (32.0                         | %)
|                                       |  |                            |  |                            |   |  |                               |   
|Total internet subscribers             |  | 287,263                    |  | 388,451                    |   |  | 35.2                          | % 
|                                       |  |                            |  |                            |   |  |                               |   
|Blueyonder Broadband                   |  |                            |  |                            |   |  |                               |   
|Average subscriber churn rate          |  |                           |  | 7.5                        | % |  |                              |   
|Average monthly revenue per subscriber |  |                           |  | £25.21                     |   |  |                              |   



Telewest recommenced
marketing Telewests high-speed internet service for home personal computers, blueyonder broadband internet, on a national basis from the start of 2001. With the exception of Telewests Eurobell and Cabletime areas, Telewest
had full coverage across all of its regions.



Business Sales
Division



|                                                |  |                             |        |                            |   |                                 |  |     |  
|----------------------------------------------- |  | --------------------------- | ------ | -------------------------- | - | ------------------------------- |  | --- | -
|                                                |  | Year ended December 31,2000 |        | Year endedDecember 31,2001 |   | Percentage increase/ (decrease) | 
|Business Sales Division                         |  |                             |        |                            |   |                                 |  |     |  
|Revenue (in millions)                           |  | £                           | 248    |                            | £ | 268                             |  | 8.1 | %
|                                                |  |                             |        |                            |   |                                 |  |     |  
|Business customer accounts                      |  |                             | 66,507 |                            |   | 72,934                          |  | 9.7 | %
|Average annualized revenue per customer account |  |                             | £3,070 |                            |   | £3,137                          |  | 2.2 | %



The increase in
business sales division revenue was attributable to the full-year impact of the Eurobell acquisition (approximately £17 million), increases in sales of voice and data services primarily to SMEs and an increase in average annualized revenue per
customer account, offset by lower revenues contributed by Telewests carrier services unit (described below).



34



---

Excluding Telewests carrier services unit, revenues increased by £39 million or 22.0% from £177 million for the year ended December 31,
2000 to £216 million for the year ended December 31, 2001.



Telewests carrier services unit contributed £52 million of revenue for the year ended December 31, 2001 compared with £71 million for the year ended December 31, 2000.



The increase in the sale of voice and data services resulted primarily from
an increase in the number of business customer accounts using these services.



Average annualized revenue per customer account increased as Telewest sold additional services to its existing customers.



During the year, Telewest launched a high-speed broadband internet service for small businesses, blueyonder workwise, which reached 1,658
subscribers by December 31, 2001. In August 2001, Telewest introduced the first hosted Microsoft Exchange service by any network operator in Europe. This service is available through the blueyonder workwise portal and had attracted 3,500 licenses at
December 31, 2001.



CONTENT SEGMENT



Content Segment Revenue



|                                               |  |                                      |     |   |                            |   |     |                                 |  |      |  
|---------------------------------------------- |  | ------------------------------------ | --- | - | -------------------------- | - | --- | ------------------------------- |  | ---- | -
|                                               |  | Year ended December 31,2000          |     |   | Year endedDecember 31,2001 |   |     | Percentage increase/ (decrease) | 
|                                               |  | (in millions, except operating data) |    
|Content Segment                                |  |                                      |     |   |                            |   |     |                                 |  |      |  
|Subscription revenue                           |  | £                                    | 26  |   |                            | £ | 33  |                                 |  | 26.9 | %
|Advertising revenue                            |  | £                                    | 26  |   |                            | £ | 38  |                                 |  | 46.2 | %
|Net revenue(1)                                 |  | £                                    | 81  |   |                            | £ | 129 |                                 |  | 59.3 | %
|Number of homes receiving Telewest programming |  |                                      | 6.9 |   |                            |   | 7.5 |                                 |  | 8.7  | %
|Share of the net profits of UKTV               |  | £                                    | 7   |   |                            | £ | 7   |                                 |  | 0    | %
|UK television advertising market share         |  |                                      | 2.7 | % |                            |   | 3.0 | %                               |  | 11.1 | %

---

|(1) | Net revenue consists of total revenue (subscription revenue, advertising revenue, management fees, transactional and interactive revenue and other revenue) less inter-segmental
revenues of £7 million for the period from April 19, 2000 to December 31, 2000 and £14 million for the year ended December 31, 2001.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Telewests acquisition of Flextech was completed on April 19, 2000 and the results of Flextechs content segment were consolidated from that
date. Accordingly, no revenues were included for the period from January 1, 2000 to April 18, 2000. For illustrative purposes only, net revenues for the year ended December 31, 2000 were £118 million.



Again, for illustrative purposes only, Telewests content segment
revenue, before elimination of inter-segmental trading, increased by £14 million or 10.9% from £129 million for the year ended December 31, 2000 to £143 million for the year ended December 31, 2001. The increases for the year
resulted primarily from an increase in the number of homes that received programming from Telewests content segment, offset in part by lower subscription rates from BSkyB digital television subscribers. Advertising revenues, included within
the foregoing revenues, increased during the year despite a decline in UK television national advertising revenue of 10% compared to the previous year. Telewests share of basic pay-television viewing fell from 23.1% in the year ended December
31, 2000 to 20.4% in the year ended December 31, 2001. This fall was due primarily to increased competition in the multi-channel television market, where the number of basic television channels increased from 96 in 2000 to 115 in 2001.



35



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COMBINED CABLE AND CONTENT SEGMENTS



Operating Costs and Expenses



|                                    |  |                             |       |                             |   |                                 |  |      |  
|----------------------------------- |  | --------------------------- | ----- | --------------------------- | - | ------------------------------- |  | ---- | -
|                                    |  | Year ended December 31,2000 |       | Year ended December 31,2001 |   | Percentage increase/ (decrease) | 
|                                    |  | (in millions)               |      
|Operating Costs and Expenses        |  |                             |       |                             |   |                                 |  |      |  
|Cable programming expenses          |  | £                           | 132   |                             | £ | 142                             |  | 7.6  | %
|Cable telephony expenses            |  |                             | 235   |                             |   | 235                             |  |     |  
|Content segment expenses            |  |                             | 46    |                             |   | 83                              |  | 80.4 | %
|Depreciation                        |  |                             | 423   |                             |   | 469                             |  | 10.9 | %
|                                    |  |                             |       |                             |   |                                 |  |      |  
|Total expenses                      |  | £                           | 836   |                             | £ | 929                             |  | 11.1 | %
|Selling, general and administrative |  |                             | 445   |                             |   | 497                             |  | 11.7 | %
|Amortization of goodwill            |  |                             | 147   |                             |   | 183                             |  | 24.5 | %
|Impairment of goodwill              |  |                             |      |                             |   | 766                             |  |     |  
|                                    |  |                             |       |                             |   |                                 |  |      |  
|Total Operating Costs and Expenses  |  | £                           | 1,428 |                             | £ | 2,375                           |  | 66.3 | %
|                                    |  |                             |       |                             |   |                                 |  |      |  



Telewests
operating costs and expenses, before depreciation, amortization and impairment of goodwill increased principally as a result of the Flextech merger, the Eurobell acquisition and increased selling, general and administrative costs.



Cable programming expenses, including the full-year impact of the Eurobell
acquisition of approximately £5 million, increased principally as the result of the increased costs of programming for Telewests digital television packages, which had more channels than their analog counterparts. These were largely
offset by lower programming expenses resulting from an increase in the number of Telewests television subscribers choosing to subscribe to packages with fewer or no premium channels, the elimination on consolidation of programming fees paid
for Flextech content and continuing favorable trends in distribution. As a percentage of cable television revenues, programming expenses decreased from 47.3% for the year ended December 31, 2000 to 43.2% for the year ended December 31, 2001. Not
accounting for the Flextech merger and the resulting consolidation of programming expenses, programming expenses as a percentage of cable television revenues would have decreased from 49.8% in the year ended December 31, 2000 to 46.5% in the year
ended December 31, 2001.



Cable telephony expenses remained
constant. These costs are principally payments to third-party network providers for terminating calls that originate on Telewests networks (i.e., interconnect charges). As a percentage of consumer telephony and business services
revenues, telephony expenses decreased from 33.9% for the year ended December 31, 2000 to 31.1% for the year ended December 31, 2001. These decreases resulted principally from increased telephony penetration and the resulting increase in volume of
traffic terminating on Telewests network and was in part offset by the increase in the proportion of its total traffic terminating on mobile networks or third-party internet service providers where interconnection charges result in higher unit
termination costs.



The content segments expenses consist
principally of amortization costs of programming shown on its television channels, direct costs associated with its advertising revenues, and costs of products sold through its web and transactional services.



The increase in depreciation expense was primarily attributable to the
increased capital expenditure associated with the roll-out of digital services and high-speed data equipment, and the full-year impact of the Eurobell acquisition.



The increase in SG&A primarily reflected the full-year impact of the Eurobell and Flextech acquisitions, the increase in
employment costs due to an increase in headcount between December 31, 2000 and 2001 and the expense associated with the launch of Telewests digital and high-speed internet products, and was partially offset by a decrease in employee
share-based compensation costs to a charge of £2 million in the year ended December 31, 2001 from a charge of £5 million in the year ended December 31, 2000. Excluding share-based



36



---

compensation costs, SG&A increased marginally as a percentage of total operating costs before depreciation, amortization and impairment from 51.6% in the
year ended December 31, 2000 to 51.9% in the year ended December 31, 2001. After capitalization to related property and equipment, staff costs increased to £257 million for the year ended December 31, 2001 from £229 million for the year
ended December 31, 2000, reflecting an increase in the average number of employees of approximately 1,350 on a base of approximately 9,300 as at December 31, 2000. This increase in employees reflected Telewests enlargement, its continuing
focus on customer service and staffing requirements to support high-speed internet and digital television services offset in part by a reduction in the use of contractors for installation.



Total labor and overhead costs capitalized in connection with new subscriber
installations and enhancement to Telewests networks increased by £27 million or 15.4% from £175 million for the year ended December 31, 2000 to £202 million for the year ended December 31, 2001. The level of capitalized labor
and overhead costs increased primarily as a result of increases in installations of digital television services in 2001 and costs for other services related to Telewests growing subscriber base.



Amortization expense increased primarily as a result of the merger with
Flextech.



Other Income/(Expense)



|                                                           |  |                             |      |   |                             |   |      |                                 |  |        |  
|---------------------------------------------------------- |  | --------------------------- | ---- | - | --------------------------- | - | ---- | ------------------------------- |  | ------ | -
|                                                           |  | Year ended December 31,2000 |      |   | Year ended December 31,2001 |   |      | Percentage increase/ (decrease) | 
|                                                           |  | (in millions)               |     
|Other income/(expense)                                     |  |                             |      |   |                             |   |      |                                 |  |        |  
|Interest income                                            |  | £                           | 15   |   |                             | £ | 15   |                                 |  | 0.0    | %
|Interest expense (including amortization of debt discount) |  |                             | (385 | ) |                             |   | (487 | )                               |  | 26.5   | %
|Foreign exchange losses, net                               |  |                             | (15  | ) |                             |   |     |                                 |  |       |  
|Share of net losses of affiliates and impairment           |  |                             | (15  | ) |                             |   | (216 | )                               |  | 1340.0 | %
|Minority interest in losses of subsidiaries, net           |  |                             | 1    |   |                             |   | 1    |                                 |  | 0.0    | %
|Other, net                                                 |  |                             | (3   | ) |                             |   | (3   | )                               |  | 0.0    | %
|                                                           |  |                             |      |   |                             |   |      |                                 |  |        |  
|Total other income/(expense), net                          |  | £                           | (402 | ) |                             | £ | (690 | )                               |  | 71.6   | %
|                                                           |  |                             |      |   |                             |   |      |                                 |  |        |  



Other expense, net of
income, increased by £288 million or 71.6% from £402 million for the year ended December 31, 2000 to £690 million for the year ended December 31, 2001. This increase consisted primarily of increased interest expense and impairment
of investments in affiliates.



Interest expense increased
primarily as a result of the additional interest expense incurred from additional borrowing to fund the roll-out of digital television and broadband internet products, acquisitions and general working capital, offset in part by lower interest rates
on Telewests borrowings under its bank facilities. The additional borrowing included Telewests Senior Convertible Notes due 2005, issued in July 2000, and its Accreting Convertible Notes due 2003, issued in connection with the
acquisition of Eurobell in November 2000.



In the year ended
December 31, 2000, foreign exchange gains and losses arose principally from the fact that the retranslation to sterling of Telewests US dollar-denominated debentures and notes using the period-end exchange rate and marking associated
derivative instruments to their market value, were recognized within earnings.



Telewests share of net losses of its affiliated companies, accounted for under the equity method of accounting, increased principally as a result of the impairment of its investments in SMG and UKTV, noted
above.



Other losses, net, in both 2000 and 2001, arose as a
result of the disposal of certain investments.



Following the
replacement of Telewests old senior secured credit facility and the then existing Flextech credit facility during the year ended December 31, 2001, Telewest initially recorded an extraordinary loss of £15 million due to the write-off of
the bank facility fees which were being deferred and written off over the life of



37



---

those facilities. Subsequently in 2002, under SFAS 145 (as described herein), this £15 million has been reclassified from extraordinary items to
interest expense. Consequently, the foregoing paragraphs describing other expense, net of income and interest expense reflect such reclassification.



Liquidity and Capital Resources



Telewest has not been able historically to fund its operating expenditure and interest costs through operating cash flow and has therefore incurred substantial indebtedness. In the first half of 2002, a series of circumstances, including
the well-publicized downturn in the telecommunications, media and technology sector, increasingly tight capital markets, and the downgrading of Telewests corporate credit ratings in March and April 2002, severely limited its access to
financing and consequently impaired its ability to service its debt and refinance its existing debt obligations. As a result, since April of 2002, Telewest has been examining options relating to a restructuring of its balance sheet, including
entering into detailed negotiations with the Bondholder Committee and a steering committee of its Senior Lenders.



On October 1, 2002, following entry into a preliminary non-binding agreement with the Bondholder Committee, Telewest elected not to pay interest under
certain of its notes and debentures and to defer settlement of certain foreign exchange hedging contracts. On November 1, 2003, Telewest did not pay interest on additional debt securities as it fell due and did not pay the principal amount due on an
issue of notes. The non-payment of interest and principal, and the decision to defer settlement of certain foreign exchange hedging contracts, ultimately resulted in defaults in respect of each of these debt securities and created a cross-default
under Telewests existing senior secured credit facility. Telewest has further been informed by the Senior Lenders that steps taken, and expected to be taken, as part of the Financial Restructuring would constitute one or more further defaults
under the existing senior secured credit facility. In addition, as a result of provisions made for a VAT judgment and fees incurred in respect of the Financial Restructuring, Telewest has informed the Senior Lenders that it was in breach of two of
the financial covenants in its existing senior secured credit facility for the three- month period ended December 31, 2002. Telewest has also informed the Senior Lenders that, as a result of the continuing fees relating to the Financial
Restructuring and the tightening of financial covenants on January 1, 2003, it was in breach of two financial covenants for the three-month period ended March 31, 2003. As a result of these defaults, the Senior Lenders and many of Telewests
other creditors have a right to accelerate their obligations and demand immediate repayment.



In current conditions, Telewests directors have been able to permit Telewest to do business and to meet its working capital needs as a direct result of the continued support of its creditors (in generally not
calling defaults or accelerating their claims) and the Telewest directors belief that the Financial Restructuring is likely to be implemented. Because Telewest is not making current interest and principal payments on its notes and debentures,
it is able to finance its remaining working capital needs through available cash and cash generated by its operations. However, Telewest does not believe its creditors will continue to forebear from declaring defaults if the Financial Restructuring
is not implemented or if it is not implemented in a timely manner. Without the support of its creditors, Telewests directors may have no option but to take steps to petition for some sort of insolvency protection, which could significantly
impair Telewests ability to operate.



At December 31,
2002, Telewest and its wholly owned finance subsidiary Telewest Jersey had approximately £3.4 billion in debt securities outstanding, £138 million in deferred and unpaid interest outstanding, £2.0 billion drawn-down under the
existing senior secured credit facility and £204 million outstanding under capital leases. Telewests outstanding notes and debentures, all of which are capable of being accelerated in accordance with the terms that govern them, are as
follows:



|                                                                              |  |                              |             |                |                  
|----------------------------------------------------------------------------- |  | ---------------------------- | ----------- | -------------- | -----------------
|Security:                                                                     |  | Principal Amount atMaturity: |             | Maturity Date:
|5% Accreting Notes due 2003                                                   |  | £                            | 255,073,000 |                | November 1, 2003*
|5% Accreting Notes due 2003                                                   |  | £                            | 34,440,000  |                | November 1, 2003*
|5% Accreting Notes due 2003                                                   |  | £                            | 4,026,000   |                | November 1, 2003*
|Telewest Jersey6% Senior Convertible Notes due 2005 (guaranteed by Telewest) |  | $                            | 500,000,000 |                | July 7, 2005     



38



---

|                                        |  |                              |               |                |                  
|--------------------------------------- |  | ---------------------------- | ------------- | -------------- | -----------------
|Security:                               |  | Principal Amount atMaturity: |               | Maturity Date:
|95/8%
Senior Debentures due 2006        |  | $                            | 300,000,000   |                | October 1, 2006  
|51/4%
Senior Convertible Notes due 2007 |  | £                            | 299,500,000   |                | February 19, 2007
|11% Senior Discount Debentures due 2007 |  | $                            | 1,536,413,000 |                | October 1, 2007  
|111/4% Senior Notes due 2008            |  | $                            | 350,000,000   |                | November 1, 2008 
|97/8%
Senior Discount Notes due 2009    |  | £                            | 325,000,000   |                | April 15, 2009   
|91/4%
Senior Discount Notes due 2009    |  | $                            | 500,000,000   |                | April 15, 2009   
|97/8%
Senior Notes due 2010             |  | £                            | 180,000,000   |                | February 1, 2010 
|97/8%
Senior Notes due 2010             |  | $                            | 350,000,000   |                | February 1, 2010 
|113/8% Senior Discount Notes due 2010   |  | $                            | 450,000,000   |                | February 1, 2010 

---

* Not paid at maturity



If the Financial Restructuring is completed, all of the foregoing notes and
debentures, as well as the intercompany loan of the proceeds of Telewest Jerseys notes to Telewest, and Telewests guarantee of those notes, will be cancelled in exchange for the issuance of 98.5% of the common stock of New Telewest to
the existing holders of those debt securities and certain other creditors with claims in connection with those debt securities. Completion of the restructuring is subject to significant risks and conditions.



On March 16, 2001, Telewest Communications Networks Limited, a wholly owned
subsidiary of Telewest, entered into the existing senior secured credit facility with a syndicate of banks for £2.25 billion. Telewest Communications Networks Limited is referred to as TCN in this Annual Report. The existing senior secured
credit facility includes a permitted institutional financing capacity of £250 million, referred to as the Institutional Tranche, and also permits under its terms £500 million of leasing and vendor financing. As of December
31, 2002, TCN had received £125 million from GE Capital Structured Finance Group Limited and £20 million from Newcourt Capital (UK) Ltd, pursuant to the Institutional Tranche and Telewest/TCN had £224 million of leasing and other
permitted financing. Borrowings on the facility are secured on the assets of Telewest, including partnership interests and shares of subsidiaries. Except for the Institutional Tranche, borrowings bear interest at between 0.5% and 2.00% above LIBOR
(depending on the ratio of borrowings to quarterly annualized consolidated net operating cash flow). Borrowings under the Institutional Tranche bear interest at up to 4% above LIBOR. The terms of the facility restrict additional indebtedness, liens,
investments, disposals and other activities.



Currently,
TCNs ability to borrow under the facility is restricted by amendments agreed with its Senior Lenders on August 21 and September 27, 2002 which effectively prohibit TCN from further drawdowns under the facility. As at December 31, 2002,
£2.0 billion was outstanding under the facility. In connection with the negotiations with TCNs Senior Lenders, the facility was amended on August 21, 2002, September 27, 2002, February 26, 2003 and May 29, 2003 to, among other
things, restrict the level of its permitted borrowings, investments, encumbrances and disposals.



As part of the Financial Restructuring, Telewest and TCN have agreed to the terms of, but not yet executed, a commitment letter with the Senior Lenders
pursuant to which TCNs existing senior secured credit facility will be amended and replaced by the proposed amended senior secured credit facility.



The current terms of the proposed amended senior secured credit facility contemplate total committed credit facilities of term loans of £1,840
million, a committed revolving credit facility of £140 million, a committed overdraft facility of £50 million and an uncommitted term loan facility of £125 million. Of the committed amount of £1,840 million, £1,695
million would mature on December 31, 2005, with the balance of £145 million maturing on June 30, 2006. New Telewest does not expect to be able to generate sufficient free cash flow to be able to repay these facilities and will therefore need
to refinance a substantial majority of the proposed amended senior secured credit facility before December 31, 2005. There can be no assurance, however, that this refinancing will be available to Telewest or New Telewest or will be available on
acceptable terms.



39



---

Upon becoming effective, the proposed amended senior secured credit facility would contain new financial
and performance covenants for TCN, the borrower. New Telewest anticipates that TCN will be in compliance with these covenants immediately upon the proposed amended senior secured credit facility becoming effective and following the completion of the
Financial Restructuring. Continued compliance, however, will depend on a number of factors, including improvements in New Telewests operating performance and cash flow, the level of interest rates, and other factors that may not have been
anticipated or which are out of TCNs control. Although its management believes that TCN will be able to grow at a rate which will allow it to meet those covenants, its inability to do so could entitle its Senior Lenders to accelerate all
outstanding debt under that facility. New Telewest is unlikely to have sufficient cash resources to repay the outstanding indebtedness if it is declared immediately due and payable. Moreover, New Telewest will also be obligated to utilize excess
cash flow and certain other funds to repay the Senior Lenders.



As indicated above, historically Telewest has not generated sufficient cash flow from its operations to meet its capital expenditure and debt service requirements. If the Financial Restructuring is completed, New Telewest and its
subsidiaries will have significantly lower interest expense and principal repayment requirements as a result of the reduction of indebtedness. However, the business of Telewest will continue to require cash to fund its operations (including possible
operating losses), capital expenditures and debt service repayments (albeit reduced). In addition, the ability of TCN and its subsidiaries to upstream cash is extremely limited, with the result that no assurance can be given that New Telewest and
Telewest UK will have cash available to fund any liabilities that they might incur. New Telewest and Telewest UK are also restricted in their ability to borrow.



The current long-range plan was adopted by existing management as part of Telewests attempts to address its financial situation. Telewest expects
that when the Financial Restructuring is completed, the directors of New Telewest will review and revise Telewests current long-range business plan. Although any changes based on the review of the existing Telewest long-range plan will likely
take into account the need to meet the financial and performance covenants in the proposed amended senior secured credit facility, it is not possible to anticipate the impact these changes will have on New Telewests liquidity.



Telewest anticipates that, after the Financial Restructuring is completed,
New Telewests principal sources of funds will be proceeds from the proposed amended senior secured credit facility, additional vendor financing, if available, possible strategic sales of assets, cash in hand and cash flow from operating
activities. Future actual funding requirements could exceed currently anticipated requirements. Differences may result from higher-than-anticipated costs, including higher interest costs on the proposed amended senior secured credit facility as a
result of higher interest rates generally, higher capital expenditure and/or lower than anticipated revenues. Actual costs, capital expenditure and revenues will depend on many factors, including, among other things, consumer demand for
voice, video, data and internet services, the impact on the business of new and emerging technologies, the extent to which consumer preference develops for cable television over other methods of providing in-home entertainment, the development of
the interactive e-commerce market, consumer acceptance of cable telephony as a viable alternative to BTs telephony services, the continued downward pressure on telephony margins and the general economic environment.



New Telewest will, however, continue to be required to devote a significant
proportion of its cash flow from operations to the payment of interest on the proposed amended senior secured credit facility, thereby reducing funds available for other purposes. It is possible that New Telewest may continue to incur losses and may
not achieve or sustain sufficient cash flow in the future for the payment of interest and/or other purposes.



Capital Expenditure



|                                    |  |                              |     |                              |   |    
|----------------------------------- |  | ---------------------------- | --- | ---------------------------- | - | ---
|                                    |  | Year ended December 31, 2001 |     | Year ended December 31, 2002
|                                    |  | (in millions)               
|Additions to property and equipment |  | £                            | 653 |                              | £ | 461



40



---

The decrease in capital expenditure is due to reduced network spend, falling electronic equipment prices
and lower levels of customer acquisition. Telewests capital expenditure has primarily funded the construction of local distribution networks and its National Network, capital costs of installing customers, and enhancements to its network for
new product offerings. The additions in the year ended December 31, 2002 were principally a result of network capacity upgrades and new subscriber installations in connection with Telewests roll-out of digital television and broadband internet
services.



Notwithstanding that capital expenditures are
expected to continue to decrease, Telewest expects to continue to have significant capital needs in the future. With the majority of its network construction complete and substantially all network upgrades necessary for the delivery of telephony and
digital services complete, it is anticipated that capital expenditure will be largely driven by the costs associated with the connection of new subscribers (which will vary depending upon the take-up of services) and the replacement of network
assets at the end of their useful lives.



Consolidated Statements of Cash
Flows



Years Ended December 31, 2000, 2001 and 2002



|                                                     |  |                             |      |   |                             |   |      |                             |  |   |      |  
|---------------------------------------------------- |  | --------------------------- | ---- | - | --------------------------- | - | ---- | --------------------------- |  | - | ---- | -
|                                                     |  | Year endedDecember 31, 2000 |      |   | Year endedDecember 31, 2001 |   |      | Year endedDecember 31, 2002 | 
|                                                     |  | (in millions)               |     
|Net cash provided by/(used in) operating activities  |  | £                           | (4   | ) |                             | £ | 13   |                             |  | £ | 103  |  
|Net cash used in investing activities                |  |                             | (556 | ) |                             |   | (561 | )                           |  |   | (365 | )
|Net cash provided by financing activities            |  |                             | 555  |   |                             |   | 502  |                             |  |   | 638  |  
|                                                     |  |                             |      |   |                             |   |      |                             |  |   |      |  
|Net increase/(decrease) in cash and cash equivalents |  | £                           | (5   | ) |                             | £ | (46  | )                           |  | £ | 376  |  
|Cash and cash equivalents at beginning of year       |  |                             | 65   |   |                             |   | 60   |                             |  |   | 14   |  
|                                                     |  |                             |      |   |                             |   |      |                             |  |   |      |  
|Cash and cash equivalents at end of year             |  | £                           | 60   |   |                             | £ | 14   |                             |  | £ | 390  |  
|                                                     |  |                             |      |   |                             |   |      |                             |  |   |      |  



For the year ended
December 31, 2002, Telewest had a net cash inflow from operating activities of £103 million compared with a net inflow of £13 million for the year ended December 31, 2001, and a net outflow of £4 million for the year ended
December 31, 2000. The increase in net cash provided by operating activities resulted principally from improved operating results, declining capital expenditures and management of working capital together with the deferral of the payment of interest
in advance of the Financial Restructuring.



Telewest incurred a
net cash outflow from investing activities of £365 million for the year ended December 31, 2002 compared with £561 million for the year ended December 31, 2001, a decrease of £196 million or 34.9%. Net cash outflow from investing
activities for the year ended December 31, 2000 of £556 million was comparable to that for the year ended December 31, 2001. Capital expenditure accounted for £448 million of the total in 2002 compared with £548 million in 2001 and
£527 million in 2000, which was offset in part by the proceeds of sales of investments in subsidiary and affiliated companies, as described below. Additions to property and equipment in the year ended December 31, 2002 totaled £461
million, a decrease of £192 million or 29.4% from £653 million for the year ended December 31, 2001. Telewests capital expenditure has primarily funded the construction of local distribution networks and the National Network,
capital costs of installing customers and enhancements to its network capacity for new product offerings. The additions in the year ended December 31, 2002 were principally a result of network capacity upgrades and new subscriber installations in
connection with Telewests roll-out of digital television and broadband internet services. At December 31, 2002, 94.3% of the homes passed and marketed in Telewests addressable areas were capable of receiving its digital television and
broadband internet services.



Net cash provided by financing
activities totaled £638 million for the year ended December 31, 2002 compared with £502 million for the year ended December 31, 2001 and £555 million for the year ended December 31, 2000. For the year ended December 31, 2002, net
cash provided by financing activities consisted primarily of £640 million in drawdowns from the existing senior secured credit facility and a net £76 million realized on the termination of US dollar/pound sterling exchange rate hedging
arrangements offset in part by the repayment of the loan secured on Telewests interest in approximately 16.9% of the issued share capital of SMG plc and finance lease payments. Net cash provided by financing activities for the year ended
December 31, 2001 included the repayment on March 16, 2001 of £810 million and £122 million under an old senior secured credit facility and a facility at Telewests Flextech subsidiary, respectively, with a drawdown from the
existing senior secured credit facility. Net cash provided by financing activities for the year ended December 31, 2000 included proceeds of £894 million from the issuance of various notes and net proceeds of £107 million from the
maturity of forward contracts offset in part by repayments of £141 million and £260 million under old credit facilities and the existing senior secured credit facility, respectively.



As of December 31, 2002, Telewest had cash balances of £390 million on
a consolidated basis (excluding £12 million that was restricted as to use to providing security for leasing obligations). Cash balances increased by



41



---

£376 million during the year ended December 31, 2002 mainly as a result of drawdowns from the existing senior secured credit facility, and cash
realized on the termination of certain foreign exchange contracts and on the disposals of shareholdings in subsidiary and affiliated companies. As of December 31, 2000 and 2001, Telewest had cash balances of £60 million and £14 million,
respectively (excluding £12 million that was restricted, as noted, above in each of 2000 and 2001; and £8 million that was on deposit to guarantee the temporary overdraft facility of an affiliated company in 2001).



Included in the table of contractual obligations shown below is a total of
£13 million relating to capital expenditure authorized by Telewest for which no provision has been made in the consolidated financial statements. This amount includes subscriber installations (e.g., set-top boxes) for customer growth,
network enhancements and computer projects necessary for the maintenance of the infrastructure of Telewests business. In addition, and also included in the table, Telewest has contracted to buy £32 million of programming rights for which
the license period has not yet started. These commitments will be funded when required from operating cash flow and available bank facilities. Both of these amounts are shown as being payable in less than one year.



Contractual Obligations and Other Commercial Commitments



Telewests contractual obligations and other commercial commitments as at December 31, 2002 are summarized in the tables below.



|                                   |  |                        |  |                  |  |           |  |           |  |              
|---------------------------------- |  | ---------------------- |  | ---------------- |  | --------- |  | --------- |  | -------------
|                                  
|Contractual Obligations            |  |                        |  |                  |  |           |  |           |  |              
|                                  
|                                   |  | Payments Due by Period
|                                   |  | Total                  |  | Less than 1 year |  | 1-3 years |  | 4-5 years |  | After 5 years
|                                   |  | £m                     |  | £m               |  | £m        |  | £m        |  | £m           
|                                  
|Debt                               |  | 5,450                  |  | 5,444            |  | 3         |  | 3         |  |             
|Capital lease obligations          |  | 204                    |  | 77               |  | 73        |  | 38        |  | 16           
|Operating leases                   |  | 160                    |  | 16               |  | 28        |  | 25        |  | 91           
|Unconditional purchase obligations |  | 782                    |  | 782              |  |          |  |          |  |             
|Other long-term obligations        |  |                       |  |                 |  |          |  |          |  |             
|                                  
|Total contractual obligations      |  | 6,596                  |  | 6,319            |  | 104       |  | 66        |  | 107          
|                                  



The following table
includes information about Telewests other commercial commitments as of December 31, 2002. Other commercial commitments are items that Telewest could be obligated to pay in the future. They are not required to be included in the balance sheet.



|                             |  |                                            |  |                  |  |           |  |           |  |              
|---------------------------- |  | ------------------------------------------ |  | ---------------- |  | --------- |  | --------- |  | -------------
|                            
|Other Commercial Commitments |  |                                            |  |                  |  |           |  |           |  |              
|                            
|                             |  | Amount of Commitment Expiration Per Period
|                             |  | Total AmountsCommitted                     |  | Less than 1 year |  | 1-3 years |  | 4-5 years |  | After 5 years
|                             |  | £m                                         |  | £m               |  | £m        |  | £m        |  | £m           
|                            
|Guarantees                   |  | 20                                         |  | 8                |  | 12        |  |          |  |             
|                            



Telewest has no other
material contractual or other commercial commitments.



42



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PART II



ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



Telewest is currently in default of all of its series of bonds for failure to pay interest when due. In addition, Telewests wholly owned subsidiary
Telewest Finance (Jersey) Limited, is currently in default under its bonds. Set forth below is a chart indicating the indebtedness, the amount of the default and the total arrearage as of the date of this Report. Each of the defaults is a result of
failure to pay interest when due.



|                                                                              |  |                  |       |                |   |        
|----------------------------------------------------------------------------- |  | ---------------- | ----- | -------------- | - | -------
|Indebtedness:                                                                 |  | Amount ofDefault |       | TotalArrearage
|                                                                              |  | (in millions)   
|Telewests Senior Secured Credit Facility                                     |  | £                | 0     |                | £ | 2,000  
|5% Accreting Notes due 2003*                                                  |  | £                | 293.6 |                | £ | 293.6  
|Telewest Jersey6% Senior Convertible Notes due 2005 (guaranteed by Telewest) |  | $                | 51.1  |                | $ | 551.1  
|95/8%
Senior Debentures due 2006                                              |  | $                | 60.0  |                | $ | 360.0  
|51/4%
Senior Convertible Notes due 2007                                       |  | £                | 24.7  |                | £ | 324.2  
|11% Senior Discount Debentures due 2007                                       |  | $                | 354.9 |                | $ | 1,891.3
|111/4% Senior Notes due 2008                                                  |  | $                | 77.8  |                | $ | 427.8  
|97/8%
Senior Discount Notes due 2009                                          |  | £                | 0     |                | £ | 321.2  
|91/4%
Senior Discount Notes due 2009                                          |  | $                | 0     |                | $ | 494.5  
|97/8%
Senior Notes due 2010                                                   |  | £                | 29.6  |                | £ | 208.9  
|97/8%
Senior Notes due 2010                                                   |  | $                | 57.5  |                | $ | 406.3  
|113/8% Senior Discount Notes due 2010                                         |  | $                | 0     |                | $ | 406.7  

| | 
| | 

| | * | Not paid at maturity
| | - | --------------------



|ITEM 15. |  | CONTROLS AND PROCEDURES
|-------- |  | -----------------------



As required by Rule 13a-15 under the U.S. Securities Exchange Act of 1934 (the Exchange Act), Telewest carried out an evaluation of the
effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2002, being the end of the period covered by this Annual Report. This evaluation was carried out under the supervision and with the participation
of Telewests Managing Director, Charles Burdick, and Group Finance Director, Mark Luiz. Based upon that evaluation, the Managing Director and Group Finance Director concluded Telewests disclosure controls and procedures are effective in
timely alerting management to material information relating to Telewest required to be included in its periodic filings with the U.S. Securities and Exchange Commission.



Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be
disclosed in Telewests reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Telewests reports filed under the Exchange Act is accumulated and communicated to management, including
Telewests Managing Director and Group Finance Director, to allow timely decisions regarding required disclosure.



During the year ended December 31, 2002, there were no changes in Telewests internal control over financial reporting that have materially affected,
or are reasonably likely to affect, Telewests internal control over financial reporting.



43



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PART III



|ITEM 18. |  | FINANCIAL STATEMENTS
|-------- |  | --------------------



The financial statements required by this item are found at the end of this Annual Report, beginning on page F-2.



|ITEM 19. |  | EXHIBITS
|-------- |  | --------



The exhibits filed with or incorporated into this Annual Report are listed on the index of exhibits below.



44



---

SIGNATURES



Telewest Communications plc hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Amendment No. 1 to the Annual Report on its behalf.



Telewest Communications plcBy:

/s/ Barry R. ElsonName: Barry R. ElsonTitle: Acting Chief Executive Officer




March 24, 2004



45



---

AUDITED CON
SOLIDATED FINANCIAL STATEMENTS



Auditors
Report

to the board of directors and shareholders of Telewest Communications plc

---



We have audited the accompanying consolidated balance sheets
of Telewest Communications plc and subsidiaries (the Group) as of December 31, 2002 and 2001, and the related consolidated statements of operations, shareholders equity/(deficit) and comprehensive income and cash flows for each of the years in
the three-year period ended December 31, 2002. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, the consolidated financial statements on pages F-2 to F-36 present fairly, in all material respects, the financial position of Telewest Communications plc and subsidiaries as of December 31, 2002 and
2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002 in conformity with generally accepted accounting principles in the United States of America.



The accompanying financial statements have been prepared assuming that the Group will
continue as a going concern. As discussed in note 2 to the financial statements, the Group has suffered recurring losses, has a net shareholders deficit and is undergoing financial restructuring and this raises substantial doubt about its ability to
continue as a going concern. Managements plans in regard to these matters are also described in note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



As discussed in note 3 to the consolidated financial statements, the 2002 consolidated
financial statements have been restated.



As discussed in note 4 to the
consolidated financial statements, the Group adopted SFAS 141, Business Combinationsand SFAS 142, Goodwill and Other Intangible Assets, in 2002.



As discussed in note 4 to the consolidated financial statements, the Group changed its method of accounting for derivative instruments and hedging activities in 2001.



KPMG Audit Plc

Chartered Accountants

Registered Auditor

London, England



March 26, 2003, except for note 3, which is as of January 16, 2004.



F-1



---

Consolidated Statements of Operations

years ended December 31

---



|                                                                                                                               |  |       |  |              |        |   |              |   |        |           |  |   |           |   |  |   |       |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ----- |  | ------------ | ------ | - | ------------ | - | ------ | --------- |  | - | --------- | - |  | - | ----- | -
|                                                                                                                               |  |       |  | (Note 2)     |        |   |              |   |        |           |  |   |           |  
|                                                                                                                               |  |       |  | 2002Restated |        |   | 2002Restated |   |        | 2001      |  |   | 2000      |  
|                                                                                                                               |  | Notes |  | $ million    |        |   | £ million    |   |        | £ million |  |   | £ million |  
|                                                                                                                               | 
|Revenue                                                                                                                        |  |       |  |              |        |   |              |   |        |           |  |   |           |   |  |   |       |  
|Consumer Sales Division                                                                                                        |  |       |  |              |        |   |              |   |        |           |  |   |           |   |  |   |       |  
|Cable television                                                                                                               |  |       |  |              | 541    |   |              |   | 336    |           |  |   | 329       |   |  |   | 279   |  
|Consumer telephony                                                                                                             |  |       |  |              | 797    |   |              |   | 495    |           |  |   | 488       |   |  |   | 445   |  
|Internet and other                                                                                                             |  |       |  |              | 101    |   |              |   | 63     |           |  |   | 40        |   |  |   | 16    |  
|                                                                                                                               | 
|                                                                                                                               |  |       |  |              | 1,439  |   |              |   | 894    |           |  |   | 857       |   |  |   | 740   |  
|Business Sales Division                                                                                                        |  |       |  |              | 455    |   |              |   | 283    |           |  |   | 268       |   |  |   | 248   |  
|                                                                                                                               | 
|Total Cable Segment                                                                                                            |  |       |  |              | 1,894  |   |              |   | 1,177  |           |  |   | 1,125     |   |  |   | 988   |  
|Content Segment                                                                                                                |  |       |  |              | 171    |   |              |   | 106    |           |  |   | 129       |   |  |   | 81    |  
|                                                                                                                               | 
|Total revenue                                                                                                                  |  |       |  |              | 2,065  |   |              |   | 1,283  |           |  |   | 1,254     |   |  |   | 1,069 |  
|                                                                                                                               | 
|Operating costs and expenses                                                                                                   |  |       |  |              |        |   |              |   |        |           |  |   |           |   |  |   |       |  
|Cable programming expenses                                                                                                     |  |       |  |              | 206    |   |              |   | 128    |           |  |   | 142       |   |  |   | 132   |  
|Cable telephony expenses                                                                                                       |  |       |  |              | 351    |   |              |   | 218    |           |  |   | 235       |   |  |   | 235   |  
|Content segment expenses                                                                                                       |  |       |  |              | 113    |   |              |   | 70     |           |  |   | 83        |   |  |   | 46    |  
|Depreciation                                                                                                                   |  |       |  |              | 797    |   |              |   | 495    |           |  |   | 469       |   |  |   | 423   |  
|Impairment of fixed assets                                                                                                     |  |       |  |              | 1,353  |   |              |   | 841    |           |  |   |          |   |  |   |      |  
|                                                                                                                               | 
|Cost of sales                                                                                                                  |  |       |  |              | 2,820  |   |              |   | 1,752  |           |  |   | 929       |   |  |   | 836   |  
|Selling, general and administrative expenses                                                                                   |  |       |  |              | 846    |   |              |   | 526    |           |  |   | 497       |   |  |   | 445   |  
|Amortization of goodwill                                                                                                       |  |       |  |              |       |   |              |   |       |           |  |   | 183       |   |  |   | 147   |  
|Impairment of goodwill                                                                                                         |  |       |  |              | 2,326  |   |              |   | 1,445  |           |  |   | 766       |   |  |   |      |  
|                                                                                                                               | 
|                                                                                                                               |  |       |  |              | 5,992  |   |              |   | 3,723  |           |  |   | 2,375     |   |  |   | 1,428 |  
|                                                                                                                               | 
|Operating loss                                                                                                                 |  |       |  |              | (3,927 | ) |              |   | (2,440 | )         |  |   | (1,121    | ) |  |   | (359  | )
|Other income/(expense)                                                                                                         |  |       |  |              |        |   |              |   |        |           |  |   |           |   |  |   |       |  
|Interest income (including £12 million, £15 million and £15 million in 2002, 2001 and 2000, respectively, fromrelated
parties) |  | 22    |  |              | 30     |   |              |   | 19     |           |  |   | 15        |   |  |   | 15    |  
|Interest expense (including amortization of debt discount)                                                                     |  |       |  |              | (850   | ) |              |   | (528   | )         |  |   | (487      | ) |  |   | (385  | )
|Foreign exchange gains/(losses), net                                                                                           |  |       |  |              | 343    |   |              |   | 213    |           |  |   |          |   |  |   | (15   | )
|Share of net losses of affiliates and impairment                                                                               |  |       |  |              | (190   | ) |              |   | (118   | )         |  |   | (216      | ) |  |   | (15   | )
|Other, net                                                                                                                     |  |       |  |              | 58     |   |              |   | 36     |           |  |   | (3        | ) |  |   | (3    | )
|Minority interests in losses of consolidated subsidiaries, net                                                                 |  |       |  |              | 2      |   |              |   | 1      |           |  |   | 1         |   |  |   | 1     |  
|                                                                                                                               | 
|Loss before income taxes                                                                                                       |  |       |  |              | (4,534 | ) |              |   | (2,817 | )         |  |   | (1,811    | ) |  |   | (761  | )
|Income tax benefit                                                                                                             |  | 17    |  |              | 45     |   |              |   | 28     |           |  |   | 70        |   |  |   | 6     |  
|                                                                                                                               | 
|Net loss                                                                                                                       |  |       |  |              | (4,489 | ) |              |   | (2,789 | )         |  |   | (1,741    | ) |  |   | (755  | )
|                                                                                                                               | 
|Basic and diluted loss per ordinary share                                                                                      |  |       |  | $            | (1.56  | ) |              | £ | (0.97  | )         |  | £ | (0.60     | ) |  | £ | (0.28 | )
|Weighted average number of ordinary shares outstanding (millions)                                                              |  |       |  |              | 2,873  |   |              |   | 2,873  |           |  |   | 2,880     |   |  |   | 2,705 |  
|                                                                                                                               | 
|                                                                                                                               |  |       |  |              |       
|All income is derived from continuing operations.                                                                              |  |       |  |              |        |   |              |   |        |           |  |   |           |   |  |   |       |  



See accompanying notes to the
consolidated financial statements.



F-2



---

Consolidated Balance Sheets

years ended December 31

---



|                                                                                                                                                             |  |       |  |              |   |  |              |   |  |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- |  | ------------ | - |  | ------------ | - |  | --------- | -
|                                                                                                                                                             |  |       |  | (Note 2)     |   |  |              |   |  |           |  
|                                                                                                                                                             |  |       |  | 2002Restated |   |  | 2002Restated |   |  | 2001      |  
|                                                                                                                                                             |  | Notes |  | $ million    |   |  | £ million    |   |  | £ million |  
|                                                                                                                                                             | 
|Assets                                                                                                                                                       |  |       |  |              |   |  |              |   |  |           |  
|Cash and cash equivalents                                                                                                                                    |  |       |  | 628          |   |  | 390          |   |  | 14        |  
|Secured cash deposits restricted for more than one year                                                                                                      |  | 21    |  | 19           |   |  | 12           |   |  | 20        |  
|Trade receivables (net of allowance for doubtful accountsof £12 million and £16 million)                                                                     |  |       |  | 193          |   |  | 120          |   |  | 116       |  
|Other receivables                                                                                                                                            |  | 9     |  | 110          |   |  | 68           |   |  | 112       |  
|Prepaid expenses                                                                                                                                             |  |       |  | 43           |   |  | 27           |   |  | 33        |  
|                                                                                                                                                             | 
|Total current assets                                                                                                                                         |  |       |  | 993          |   |  | 617          |   |  | 295       |  
|Investment in affiliates, accounted for under the equitymethod, and related receivables                                                                      |  | 10    |  | 605          |   |  | 376          |   |  | 547       |  
|Property and equipment (less accumulated depreciation of£3,196 million and £1,873 million)                                                                   |  | 11    |  | 4,182        |   |  | 2,598        |   |  | 3,473     |  
|Goodwill (less accumulated amortization of £2,593 millionand £1,148 million)                                                                                 |  | 6     |  | 719          |   |  | 447          |   |  | 1,892     |  
|Inventory                                                                                                                                                    |  | 14    |  | 45           |   |  | 28           |   |  | 67        |  
|Other assets (less accumulated amortization and write offs of £76 millionand £47 million)                                                                    |  | 13    |  | 47           |   |  | 29           |   |  | 58        |  
|                                                                                                                                                             | 
|Total assets                                                                                                                                                 |  |       |  | 6,591        |   |  | 4,095        |   |  | 6,332     |  
|                                                                                                                                                             | 
|Liabilities and shareholders funds                                                                                                                          |  |       |  |              |   |  |              |   |  |           |  
|Accounts payable                                                                                                                                             |  |       |  | 177          |   |  | 110          |   |  | 109       |  
|Other liabilities                                                                                                                                            |  | 15    |  | 1,019        |   |  | 633          |   |  | 524       |  
|Debt repayable within one year                                                                                                                               |  | 16    |  | 8,762        |   |  | 5,444        |   |  |          |  
|Capital lease obligations repayable within one year                                                                                                          |  |       |  | 124          |   |  | 77           |   |  |          |  
|                                                                                                                                                             | 
|Total current liabilities                                                                                                                                    |  |       |  | 10,082       |   |  | 6,264        |   |  | 633       |  
|Deferred tax                                                                                                                                                 |  | 17    |  | 137          |   |  | 85           |   |  | 113       |  
|Debt repayable after more than one year                                                                                                                      |  | 16    |  | 10           |   |  | 6            |   |  | 4,897     |  
|Capital lease obligations repayable after more than one year                                                                                                 |  |       |  | 204          |   |  | 127          |   |  | 238       |  
|                                                                                                                                                             | 
|Total liabilities                                                                                                                                            |  |       |  | 10,433       |   |  | 6,482        |   |  | 5,881     |  
|                                                                                                                                                             | 
|Minority interests                                                                                                                                           |  |       |  | (2           | ) |  | (1           | ) |  |          |  
|                                                                                                                                                             | 
|Shareholders (deficit)/equity                                                                                                                               |  |       |  |              |   |  |              |   |  |           |  
|Ordinary shares, 10 pence par value; 4,300 millionauthorized; 2,873 and 2,886 million issuedin 2002 and 2001
respectively                                    |  |       |  | 462          |   |  | 287          |   |  | 287       |  
|Limited voting convertible ordinary shares, 10 pence par value;300 million authorized and 82 million and 63 millionoutstanding in 2002
and 2001 respectively |  |       |  | 13           |   |  | 8            |   |  | 8         |  
|Additional paid in capital                                                                                                                                   |  |       |  | 6,797        |   |  | 4,223        |   |  | 4,224     |  
|Accumulated deficit                                                                                                                                          |  |       |  | (11,094      | ) |  | (6,893       | ) |  | (4,104    | )
|Accumulated other comprehensive (loss)/income                                                                                                                |  | 20    |  | (18          | ) |  | (11          | ) |  | 37        |  
|                                                                                                                                                             | 
|                                                                                                                                                             |  |       |  | (3,840       | ) |  | (2,386       | ) |  | 452       |  
|Ordinary shares held in trust for the Telewest                                                                                                               |  |       |  |              |   |  |              |   |  |           |  
|Restricted Share Scheme and the Telewest Long-Term                                                                                                           |  |       |  |              |   |  |              |   |  |           |  
|Incentive Plan                                                                                                                                               |  |       |  |             |   |  |             |   |  | (1        | )
|                                                                                                                                                             | 
|Total shareholders (deficit)/equity                                                                                                                         |  |       |  | (3,840       | ) |  | (2,386       | ) |  | 451       |  
|                                                                                                                                                             | 
|                                                                                                                                                             |  |       |  |              |   |  |              |   |  |           |  
|                                                                                                                                                             | 
|Total liabilities and shareholders equity                                                                                                                   |  |       |  | 6,591        |   |  | 4,095        |   |  | 6,332     |  
|                                                                                                                                                             | 



See accompanying notes to the
consolidated financial statements.



F-3



---

Consolidated Statements of Cash Flows

years ended December 31

---



|                                                                                                        |  |              |   |  |              |   |  |           |   |  |           |  
|------------------------------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | --------- | - |  | --------- | -
|                                                                                                        |  | (Note 2)     |   |  |              |   |  |           |   |  |           |  
|                                                                                                        |  | 2002Restated |   |  | 2002Restated |   |  | 2001      |   |  | 2000      |  
|                                                                                                        |  | $ million    |   |  | £ million    |   |  | £ million |   |  | £ million |  
|                                                                                                        | 
|Cash flows from operating activities                                                                    |  |              |   |  |              |   |  |           |   |  |           |  
|Net loss                                                                                                |  | (4,489       | ) |  | (2,789       | ) |  | (1,741    | ) |  | (755      | )
|Adjustments to reconcile net loss to net cash provided/(utilized)by operating activities                |  |              |   |  |              |   |  |           |   |  |           |  
|Depreciation                                                                                            |  | 797          |   |  | 495          |   |  | 469       |   |  | 423       |  
|Impairment of fixed assets                                                                              |  | 1,353        |   |  | 841          |   |  |          |   |  |          |  
|Amortization of goodwill                                                                                |  |             |   |  |             |   |  | 183       |   |  | 147       |  
|Impairment of goodwill                                                                                  |  | 2,326        |   |  | 1,445        |   |  | 766       |   |  |          |  
|Amortization and write off of deferred financing costs and issue discount on Senior Discount Debentures |  | 184          |   |  | 114          |   |  | 99        |   |  | 147       |  
|Deferred tax credit                                                                                     |  | (45          | ) |  | (28          | ) |  | (70       | ) |  |          |  
|Unrealized (gain)/loss on foreign currency translation                                                  |  | (343         | ) |  | (213         | ) |  | (10       | ) |  | 20        |  
|Non-cash accrued share based compensation (credit)/cost                                                 |  | (2           | ) |  | (1           | ) |  | 1         |   |  | 5         |  
|Share of net (profits)/losses of affiliates and impairment                                              |  | (16          | ) |  | (10          | ) |  | 216       |   |  | 15        |  
|Loss on disposal of assets                                                                              |  | 148          |   |  | 92           |   |  | 4         |   |  |          |  
|Minority interests in losses of consolidated subsidiaries                                               |  |             |   |  |             |   |  | (1        | ) |  | (1        | )
|Changes in operating assets and liabilities net of effect ofacquisition of subsidiaries                 |  |              |   |  |              |   |  |           |   |  |           |  
|Change in receivables                                                                                   |  | 31           |   |  | 19           |   |  | 25        |   |  | (8        | )
|Change in prepaid expenses                                                                              |  | 10           |   |  | 6            |   |  | 6         |   |  | (19       | )
|Change in accounts payable                                                                              |  | 27           |   |  | 17           |   |  | 3         |   |  | (2        | )
|Change in other liabilities                                                                             |  | 160          |   |  | 100          |   |  | 62        |   |  | 70        |  
|Change in other assets                                                                                  |  | 24           |   |  | 15           |   |  | 1         |   |  | (46       | )
|                                                                                                        | 
|Net cash provided/(utilized) by operating activities                                                    |  | 165          |   |  | 103          |   |  | 13        |   |  | (4        | )
|                                                                                                        | 
|Cash flows from investing activities                                                                    |  |              |   |  |              |   |  |           |   |  |           |  
|Cash paid for property and equipment                                                                    |  | (721         | ) |  | (448         | ) |  | (548      | ) |  | (527      | )
|Cash paid for acquisition of subsidiaries, net of cash acquired                                         |  |             |   |  |             |   |  | (6        | ) |  | (24       | )
|Additional investments in and loans to affiliates                                                       |  |             |   |  |             |   |  | (26       | ) |  | (10       | )
|Repayment of loans made to joint ventures (net)                                                         |  | 14           |   |  | 9            |   |  | 9         |   |  | 3         |  
|Proceeds from disposal of assets                                                                        |  | 2            |   |  | 1            |   |  | 2         |   |  | 2         |  
|Disposal of subsidiary undertaking, net of cash disposed                                                |  | 23           |   |  | 14           |   |  | 8         |   |  |          |  
|Disposal of associate undertaking, net of cash disposed                                                 |  | 95           |   |  | 59           |   |  |          |   |  |          |  
|                                                                                                        | 
|Net cash used in investing activities                                                                   |  | (587         | ) |  | (365         | ) |  | (561      | ) |  | (556      | )
|                                                                                                        | 
|Cash flows from financing activities                                                                    |  |              |   |  |              |   |  |           |   |  |           |  
|Proceeds from exercise of share options                                                                 |  |             |   |  |             |   |  | 6         |   |  | 3         |  
|Share issue costs                                                                                       |  |             |   |  |             |   |  |          |   |  | (13       | )
|Proceeds from issue of Senior Discount Notes and Senior Notes 2010                                      |  |             |   |  |             |   |  |          |   |  | 544       |  
|Proceeds from issue of Senior Convertible Notes 2005                                                    |  |             |   |  |             |   |  |          |   |  | 330       |  
|Proceeds from issue of Accreting Convertible Notes 2003                                                 |  |             |   |  |             |   |  | 30        |   |  | 20        |  
|Issue costs of Notes and credit facility arrangement costs                                              |  |             |   |  |             |   |  | (41       | ) |  |          |  
|Net proceeds from maturity of forward contracts                                                         |  | 122          |   |  | 76           |   |  |          |   |  | 107       |  
|Release/(placement) of restricted deposits                                                              |  | 13           |   |  | 8            |   |  | (8        | ) |  |          |  
|Repayments from borrowings under old credit facilities                                                  |  | (3           | ) |  | (2           | ) |  | (824      | ) |  | (141      | )
|Repayment of SMG equity swap                                                                            |  | (53          | ) |  | (33          | ) |  |          |   |  |          |  
|Proceeds/(repayment) from borrowings under new credit facility                                          |  | 1,030        |   |  | 640          |   |  | 1,393     |   |  | (260      | )
|Capital element of finance lease repayments                                                             |  | (82          | ) |  | (51          | ) |  | (54       | ) |  | (35       | )
|                                                                                                        | 
|Net cash provided by financing activities                                                               |  | 1,027        |   |  | 638          |   |  | 502       |   |  | 555       |  
|                                                                                                        | 
|Net increase/(decrease) in cash and cash equivalents                                                    |  | 605          |   |  | 376          |   |  | (46       | ) |  | (5        | )
|Cash and cash equivalents at beginning of year                                                          |  | 23           |   |  | 14           |   |  | 60        |   |  | 65        |  
|                                                                                                        | 
|Cash and cash equivalents at end of year                                                                |  | 628          |   |  | 390          |   |  | 14        |   |  | 60        |  
|                                                                                                        | 



See accompanying notes to the
consolidated financial statements.



F-4



---

Consolidated Statements of Shareholders Equity/(Deficit) and

Comprehensive Loss

---



|                                                              |  |           |   |  |           |  |           |   |  |            |   |  |               |   |  |             |   |  |           |  
|------------------------------------------------------------- |  | --------- | - |  | --------- |  | --------- | - |  | ---------- | - |  | ------------- | - |  | ----------- | - |  | --------- | -
|                                                              |  | Ordinary  |   |  | Limited   |  | Shares    |   |  | Additional |   |  | Other         |   |  | Accumulated |   |  | Total     |  
|                                                              |  | shares    |   |  | voting    |  | held in   |   |  | paid-in    |   |  | comprehensive |   |  | deficit     |   |  |           |  
|                                                              |  |           |   |  | shares    |  | trust     |   |  | capital    |   |  | loss          |   |  |             |   |  |           |  
|                                                              |  | £ million |   |  | £ million |  | £ million |   |  | £ million  |   |  | £ million     |   |  | £ million   |   |  | £ million |  
|                                                              | 
|Balance at December 31, 1999                                  |  | 228       |   |  | 6         |  | (2        | ) |  | 2,328      |   |  |              |   |  | (1,608      | ) |  | 952       |  
|Ordinary shares issued on exercise of share options           |  |          |   |  |          |  |          |   |  | 3          |   |  |              |   |  |            |   |  | 3         |  
|Shares issued to acquire Flextech Plc net of issue costs      |  | 60        |   |  |          |  |          |   |  | 1,873      |   |  |              |   |  |            |   |  | 1,933     |  
|Accrued share based compensation cost                         |  |          |   |  |          |  |          |   |  | 5          |   |  |              |   |  |            |   |  | 5         |  
|Unrealised gain on deemed disposal of shares in an affiliate  |  |          |   |  |          |  |          |   |  | 7          |   |  |              |   |  |            |   |  | 7         |  
|Net loss                                                      |  |          |   |  |          |  |          |   |  |           |   |  |              |   |  | (755        | ) |  | (755      | )
|                                                              | 
|Balance at December 31, 2000                                  |  | 288       |   |  | 6         |  | (2        | ) |  | 4,216      |   |  |              |   |  | (2,363      | ) |  | 2,145     |  
|Unrealised gain/(loss) on derivative financial instruments:   |  |           |   |  |           |  |           |   |  |            |   |  |               |   |  |             |   |  |           |  
|Cumulative effects of accounting change                       |  |          |   |  |          |  |          |   |  |           |   |  | (16           | ) |  |            |   |  | (16       | )
|Amounts reclassified into earnings                            |  |          |   |  |          |  |          |   |  |           |   |  | (5            | ) |  |            |   |  | (5        | )
|Current period increase in fair value                         |  |          |   |  |          |  |          |   |  |           |   |  | 57            |   |  |            |   |  | 57        |  
|Net loss                                                      |  |          |   |  |          |  |          |   |  |           |   |  |              |   |  | (1,741      | ) |  | (1,741    | )
|                                                              |  |           |   |  |           |  |           |   |  |            |   |  |               |   |  |             |   |  |           |  
|Total comprehensive loss                                      |  |           |   |  |           |  |           |   |  |            |   |  |               |   |  |             |   |  | (1,705    | )
|Unrealised gain on deemed partial disposal of investment      |  |          |   |  |          |  |          |   |  |           |   |  | 1             |   |  |            |   |  | 1         |  
|Ordinary shares issued on exercise of share options           |  | 1         |   |  |          |  | 1         |   |  | 6          |   |  |              |   |  |            |   |  | 8         |  
|Gain on retranslation of investment in an overseas subsidiary |  |          |   |  |          |  |          |   |  | 1          |   |  |              |   |  |            |   |  | 1         |  
|Redesignation of ordinary shares                              |  | (2        | ) |  | 2         |  |          |   |  |           |   |  |              |   |  |            |   |  |          |  
|Accrued share based compensation cost                         |  |          |   |  |          |  |          |   |  | 1          |   |  |              |   |  |            |   |  | 1         |  
|                                                              | 
|Balance at December 31, 2001                                  |  | 287       |   |  | 8         |  | (1        | ) |  | 4,224      |   |  | 37            |   |  | (4,104      | ) |  | 451       |  
|Unrealised gain/(loss) on derivative financial instruments:   |  |           |   |  |           |  |           |   |  |            |   |  |               |   |  |             |   |  |           |  
|Amounts reclassified into earnings                            |  |          |   |  |          |  |          |   |  |           |   |  | (48           | ) |  |            |   |  | (48       | )
|Net loss (restated)                                           |  |          |   |  |          |  |          |   |  |           |   |  |              |   |  | (2,789      | ) |  | (2,789    | )
|                                                              |  |           |   |  |           |  |           |   |  |            |   |  |               |   |  |             |   |  |           |  
|Total comprehensive loss (restated)                           |  |           |   |  |           |  |           |   |  |            |   |  |               |   |  |             |   |  | (2,837    | )
|Accrued share based compensation (credit)/cost                |  |          |   |  |          |  | 1         |   |  | (1         | ) |  |              |   |  |            |   |  |          |  
|                                                              | 
|Balance at December 31, 2002 (restated)                       |  | 287       |   |  | 8         |  |          |   |  | 4,223      |   |  | (11           | ) |  | (6,893      | ) |  | (2,386    | )
|                                                              | 



There was no other comprehensive
income in the year ended December 31, 2000.



See accompanying notes to the
consolidated financial statements.



F-5



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



1    ORGANIZATION AND HISTORY



Telewest Communications plc (the Company) and its subsidiary undertakings
(together the Group) provide cable television, telephony and internet services to business and residential customers in the United Kingdom (UK). The Group derives its cable television revenues from installation fees, monthly
basic and premium service fees and advertising charges. The Group derives its telephony revenues from connection charges, monthly line rentals, call charges, special residential service charges and interconnection fees payable by other operators.
The Group derives its internet revenues from installation fees and monthly subscriptions to its ISP. The cable television, telephony and internet services account in 2002 for approximately 26%, 61% and 5%, respectively, of the Groups revenue.



The Group is also engaged in broadcast media activities, being the supply of
entertainment content, interactive and transactional services to the UK pay-TV broadcasting market. The Content Division accounts in 2002 for approximately 8% of the Groups revenue.



2    BASIS OF PREPARATION



The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of
America (US GAAP). The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. The Groups significant estimates and assumptions include capitalisation of labor and overhead costs; impairment of goodwill and long-lived assets (see
note 6); and accounting for debt and financial instruments (see note 5). Actual results could differ from those estimates.



The financial statements are prepared on a going concern basis, which the directors believe to be appropriate for the following reasons:



Following the directors decision on September 30, 2002 not to pay the interest on
certain of the Groups bonds and other hedging instruments, the Group is now in default of its bonds and its Senior Secured Facility.



These liabilities are now due for repayment in full and the Group is negotiating with its bondholder creditors and bank facility creditors to effect a reorganization of
the Groups debt. This will involve, among other things, the conversion of bond debt to equity and the renegotiation of existing bank facilities. The directors believe the amended facilities will provide the Group with sufficient liquidity to
meet the Groups funding needs after completion of the Financial Restructuring. Further details of the planned Financial Restructuring are included in note 23.



In order for the Financial Restructuring to be effective, the Scheme Creditors need to approve the plans by the relevant statutory majority.
In addition, the Groups shareholders need to approve the proposed share capital reorganization.



The directors are of the opinion that the status of negotiations of the financial restructuring will lead to a successful outcome and that this is sufficient grounds for issuing the annual financial statements under
the assumption of going concern.



The effect on the financial statements as
presented, of the going concern basis of preparation being inappropriate, is principally that the book value of tangible fixed assets and investments would be restated from their present value in use to a net realizable value. Whilst the directors
believe that the net realizable values would be lower than the current value in use there is insufficient information available for the directors to quantify the difference.



F-6



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



The Group faces the following significant risks and uncertainties about:



|· | its continued ability to raise finance to fund its operations;
|- | --------------------------------------------------------------



|· | its successful execution of its long term business plan, which in turn will affect the Groups ability to raise further finance under the Senior Secured Facility (see note 16);
and
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· | the need to meet financial and other covenants relating to debt instruments which have already been issued.
|- | -----------------------------------------------------------------------------------------------------------



The economic environment and currency in which the Group operates is the United Kingdom and
therefore its reporting currency is Pounds Sterling (£). Certain financial information for the year ended December 31, 2002 has been translated into US Dollars ($), with such US Dollar amounts being unaudited and presented solely for the
convenience of the reader, at the rate of $1.6095 =£1.00, the Noon Buying Rate of the Federal Reserve Bank of New York on December 31, 2002. The presentation of the US Dollar amounts should not be construed as a representation that the Pounds
Sterling amounts could be so converted into US Dollars at the rate indicated or at any other rate.



3    RESTATEMENT



Subsequent to the issuance of our consolidated financial statements as of and for the year ended December 31, 2002, we have determined the need to adjust the classification of debt previously reflected as non-current in the consolidated
balance sheet at December 31, 2002 and write off deferred financing costs as at December 31, 2002 relating to the restated debt. The adjustment of debt reclassifies £1,792 million from non-current Debt repayable after more than one
year to Debt repayable within one year. The write off of deferred financing costs decreases other assets and increases interest expense and net loss as at and for the year ended December 31, 2002 by £11 million. There was no
impact on the 2001 Consolidated Financial Statements.



These adjustments have
been made because the Company recently determined that the effect of non-payment of a hedge contract of £10.5 million in 2002 triggered a default on an additional £1,792 million of bond debt as at December 31, 2002.



We have also determined the need to accrue additional interest of £2 million relating
to additional interest for bonds in default as at December 31, 2002. This adjustment increases net loss, interest expense and other liabilities by £2 million as at and for the year ended December 31, 2002.



|                                        |  |                                        |   |  |             |  
|--------------------------------------- |  | -------------------------------------- | - |  | ----------- | -
|Balance Sheet (in £ millions)           |  | Restatement Impact onDecember 31, 2002 |  
|                                       
|                                        |  | As Reported                            |   |  | As Restated |  
|Other assets                            |  | 40                                     |   |  | 29          |  
|Total assets                            |  | 4,106                                  |   |  | 4,095       |  
|Debt repayable within one year          |  | 3,652                                  |   |  | 5,444       |  
|Other liabilities                       |  | 631                                    |   |  | 633         |  
|Total current liabilities               |  | 4,393                                  |   |  | 6,264       |  
|Debt repayable after more than one year |  | 1,798                                  |   |  | 6           |  
|Accumulated deficit                     |  | (6,880                                 | ) |  | (6,893      | )
|Total shareholders (deficit)/equity    |  | (2,373                                 | ) |  | (2,386      | )
|                                        |  |                                        |   |  |             |  
|                                        | 



|                                                                            |  |                                                       |        |   |             |   |        |  
|--------------------------------------------------------------------------- |  | ----------------------------------------------------- | ------ | - | ----------- | - | ------ | -
|Consolidated Statement of Operations (in £ millions, except per share data) |  | Restatement Impactfor the year endedDecember 31, 2002 |       
|                                                                           
|                                                                            |  | As Reported                                           |        |   | As Restated |  
|Interest expense                                                            |  |                                                       | (515   | ) |             |   | (528   | )
|Net loss                                                                    |  |                                                       | (2,776 | ) |             |   | (2,789 | )
|Basic and diluted loss per ordinary share                                   |  | £                                                     | (0.97  | ) |             | £ | (0.97  | )
|                                                                            |  |                                                       |        |   |             |  
|                                                                            | 



F-7



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



|                                                                                                |  |                                        |   |  |             |  
|----------------------------------------------------------------------------------------------- |  | -------------------------------------- | - |  | ----------- | -
|Consolidated Statement of Shareholders Equity/(Deficit) and Comprehensive Loss (in £ millions) |  | Restatement Impact onDecember 31, 2002 |  
|                                                                                               
|                                                                                                |  | As Reported                            |   |  | As Restated |  
|Total comprehensive loss                                                                        |  | (2,824                                 | ) |  | (2,837      | )
|                                                                                                |  |                                        |   |  |             |  
|                                                                                                | 



4    SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES



Principles of consolidation



The consolidated financial statements include the accounts of the Company
and those of its majority-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated upon consolidation. All acquisitions have been accounted for under the purchase method of accounting. Under this method, the
results of subsidiaries and affiliates acquired in the year are included in the consolidated statement of operations from the date of acquisition.



Impairment of long lived assets and goodwill



The Group applies Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or disposal of Long-Lived Assets.The Group
adopted, from January 1, 2002 SFAS 144 which requires that long-lived assets and certain identifiable intangibles, including goodwill, to be held and used by an entity, be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Indications of impairment are determined by reviewing undiscounted projected future cash flows. If impairment is indicated, the amount of the impairment is the amount by which the carrying
value exceeds the fair value of the assets.



Business Combinations and
Goodwill and Other Intangible Assets



In July 2001, the Financial
Accounting Standards Board (FASB) issued SFAS 141, Business Combinations and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141 requires all business combinations undertaken after June 30, 2001 to be accounted for
using the purchase method. Under SFAS 142, goodwill arising from business combinations and intangible assets with indefinite lives are no longer amortized but are subject to annual review for impairment (or more frequently should indications of
impairment arise). Goodwill associated with equity- method investments will also no longer be amortized upon adoption of SFAS 142, but will be subject to impairment testing as part of the investment to which it relates in accordance with Accounting
Principles Board Opinion No. (APB) 18, The Equity Method of Accounting for Investments in Common Stock. Separable intangible assets that do not have indefinite lives will continue to be amortized over their estimated useful lives
and will be subject to review for impairment in accordance with SFAS 144 (see below). The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. For goodwill and intangible assets acquired prior to
July 1, 2001, the Group was required to adopt SFAS 142 effective January 1, 2002. As of January 1, 2002 the Group had £2,199 million of unamortized goodwill, £1,892 million of which related to business combinations and £307 million
of which related to equity-method investments.



Impairment under SFAS 142 is
measured using a two-step approach, initially based on a comparison of the reporting units fair value to its carrying value; if the fair value is lower, then the second step compares the implied fair value of the goodwill with its carrying
value to determine the amount of the impairment. In connection with SFAS 142s transitional goodwill impairment evaluation, the Statement required the Company to perform an assessment of whether there was an indication that goodwill was
impaired as of the date of adoption of January 1, 2002. The Company compared the individual carrying value of its two reporting units, Cable and Content, to their respective fair values. The fair values of the respective reporting units were
determined from an analysis of discounted cash flows based on the Companys budgets and long-range plan. The discounted cash flow analysis was performed at a reporting unit level. At January 1, 2002 the fair values of both reporting units were
greater than their respective carrying values and therefore the adoption of SFAS 142 on January 1, 2002, had no impact on the Companys financial position or results of operations.





F-8



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Cash and cash equivalents



Cash and cash equivalents include highly liquid investments with original maturities of three months or less that are readily convertible
into cash.



Derivatives and hedging



At January 1, 2001 the Company adopted SFAS 133 Accounting for Derivative Instruments and
Hedging Activities as amended by SFAS 137 and SFAS 138. SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires
the recognition at fair value of all derivative instruments as assets or liabilities in the Companys balance sheet. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated a
hedge and if so, the type of hedge and its effectiveness as a hedge.



For
derivatives, which are not designated as hedges, changes in fair value are recorded immediately in earnings.



For derivatives designated as cash flow hedges, changes in fair value on the effective portion of the hedging instrument are recorded within other comprehensive income (OCI) until the hedged transaction
occurs and are then recorded within earnings. Changes in the ineffective portion of a hedge are recorded in earnings. For derivatives designated as fair value hedges, changes in fair value are recorded in earnings. The Group has not, however, had
any fair value hedges since the adoption of SFAS 133.



The Group discontinues
hedge accounting for derivative financial instruments when it is determined that the derivative instrument is no longer effective in offsetting changes in the cash flows of the hedged item; the derivative instrument expires or is sold; the
derivative instrument is no longer designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur; a hedged firm commitment no longer meets the definition of a firm commitment; or its management determines that
designation of the derivative instrument as a hedging instrument is no longer appropriate. The tests for determining the effectiveness of a cash flow hedge compare on a strict basis the amount and timing of cash flows on the underlying economic
exposure with the cash flows of the derivative instrument.



Upon
discontinuation of cash flow hedge accounting, the net gain or loss attributable to the hedging instrument, which has been reported in OCI to the date of discontinuation, continues to be reported in OCI until the date the hedged transaction impacts
earnings. This occurs unless it is probable that the hedged transaction will not occur by the end of the originally specified time period. If the hedged transaction is not expected to occur, the net gain or loss is reclassified from OCI to earnings
upon discontinuation.



Prior to adoption of SFAS 133 the Group had the
following accounting policies in respect of financial instruments. Foreign currency forward contracts, options and swaps, which were used to reduce the exchange risk on the principal amounts and early call premiums on certain foreign currency
borrowings, were recorded on the balance sheet at their fair value. Gains and losses arising from changes in fair value were recorded concurrently within earnings. Such gains and losses were offset by gains and losses arising from retranslating the
principal amounts of the foreign currency borrowings.



The Group also used
foreign currency forward contracts and cross currency interest rate swaps to reduce its exposure to adverse changes in exchange rates associated with the interest payments on certain foreign currency borrowings. Such foreign currency forward
contracts and cross currency interest rate swaps were accounted for using the accruals method.



The Group also used interest rate swap agreements and an interest rate collar to manage interest rate risk on the Groups borrowings. Net income or expense resulting from the differential between exchanging
floating and fixed interest payments was recorded within the consolidated statement of operations on an accruals basis from the effective date of the interest rate swap agreements and interest rate collar.





F-9



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Investments



Generally, investments in partnerships, joint ventures and subsidiaries in which the Groups voting interest is 20% to 50%, and others where the Group has
significant influence, are accounted for using the equity method. Investments which do not have a readily determinable fair value, in which the Groups voting interest is less than 20%, and in which the Group does not have significant
influence, are carried at cost and written down to the extent that there has been an other-than-temporary diminution in value. The Group accounts for certain investments in which the Groups ownership is greater than 50% using the equity
method. This method is used for such subsidiaries where the minorities have substantive participating rights such as veto over key operational and financial matters and equal representation on the board of directors.



The Group reviews the carrying values of its investments in affiliates, including any
associated goodwill, to ensure that the carrying amount of such investments are stated at no more than their recoverable amounts. The Group assesses the recoverability of its investments by determining whether the carrying value of the investments
can be recovered through projected discounted future operating cash flows (excluding interest) of the operations underlying the investments. The assessment of the recoverability of the investments will be impacted if projected future operating cash
flows are not achieved. The amount of impairment, if any, is measured based on the projected discounted future operating cash flows using a rate commensurate with the risks associated with the assets.



Advertising costs



Advertising costs are expensed as incurred. The amount of advertising costs expensed was £52 million, £48 million, and £38
million for the years ended December 31, 2002, 2001, and 2000, respectively.



Property and equipment



Property and equipment is stated at
cost. Depreciation is provided to write-off the cost, less estimated residual value, of property and equipment by equal instalments over their estimated useful economic lives as follows:



|                                         |  |          |  |                               |  |        
|---------------------------------------- |  | -------- |  | ----------------------------- |  | -------
|Freehold and long leasehold buildings    |  | 50 years |  | Other equipment               |  |        
|Cable and ducting                        |  | 20 years |  | Office furniture and fittings |  | 5 years
|Electronic equipment                     |  |          |  | Motor vehicles                |  | 4 years
|System electronics                       |  | 8 years  |  |                               |  |        
|Switching equipment                      |  | 8 years  |  |                               |  |        
|Subscriber electronics                   |  | 5 years  |  |                               |  |        
|Headend, studio, and playback facilities |  | 5 years  |  |                               |  |        



The Group accounts for costs, expenses
and revenues applicable to the construction and operation of its cable systems in accordance with SFAS 51 Financial Reporting by Cable Television Companies. Initial subscriber installation costs are capitalized and depreciated over the life
of the network.



Deferred financing costs



Direct costs incurred in raising debt are deferred and recorded on the consolidated balance
sheet in other assets. The costs are amortized to the consolidated statement of operations at a constant rate to the carrying value of the debt over the life of the obligation. Deferred financing costs in respect of bond debt in default are written
off immediately to the consolidated statement of operations.



Minority
interests



Recognition of the minority interests share of losses of
consolidated subsidiaries is limited to the amount of such minority interests allocable portion of the equity of those consolidated subsidiaries.





F-10



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Foreign currencies



Transactions in foreign currencies are recorded using the rate of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated using the rate of exchange prevailing at the balance sheet date and the gains or losses on translation are included in the consolidated statement of operations.



Revenue recognition



Revenues are recognized as network communication services are provided. Credit risk is managed by disconnecting services to customers who
are delinquent. Connection and activation fees relating to cable television, telephony and internet are recognized in the period of connection to the extent that such fees are less than direct selling costs. Any excess connection and activation fees
over direct selling costs incurred are deferred and amortized over the expected customer life.



Occasionally the Group sells capacity on its network to other telecommunications providers. Sales of capacity are accounted for as sales-type leases, operating leases, or service agreements depending on the terms of
the transaction. If title is not transferred or if the other requirements of sales-type lease accounting are not met, revenues are recognized rateably over the term of the agreement.



Programming revenues are recognized in accordance with Statement of Position (SOP) 00  2,Accounting by Producers or
Distributors of Films.Revenue on transactional and interactive sales is recognized as and when the services are delivered. Advertising sales revenue is recognized at estimated realizable values when the advertising is aired.



Recognition of contract costs



Certain of the sales of network capacity referred to above involve the Group constructing
new capacity. Where the Group retains some of this new capacity, either for subsequent resale or for use within the business, then an element of the construction costs is retained within inventory or equipment, respectively. The allocation of
construction cost between costs expensed to the statement of operations and costs capitalized within inventory or equipment is based upon the ratio of capacity to be sold and to be retained.



Pension costs



The Group operates a defined contribution scheme (the Telewest Communications plc Pension Trust) or contributes to third-party schemes on
behalf of employees. The amount included in expenses in 2002, 2001 and 2000 of £11 million, £10 million and £8 million, respectively, represents the contributions payable to the selected schemes in respect of the relevant
accounting periods.



Income taxes



Under the asset and liability method of SFAS 109 Accounting for Income Taxes,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered.



The Group recognises deferred tax assets only where it is more likely than not that the benefit will be realized through future taxable
income. Otherwise a valuation allowance is established to provide against deferred tax assets.





F-11



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Share-based compensation



SFAS 123, Accounting for Stock-Based Compensation, encourages, but does not require, companies to record compensation costs for
share-based employee compensation plans at fair value. The Group has chosen to continue to account for share-based compensation using the intrinsic value method prescribed in APB 25, Accounting for Stock Issued to Employees and related
interpretations. Accordingly, compensation cost for fixed plan share options is measured as the excess, if any, of the quoted market price of the Companys shares at the date of the grant over the amount an employee must pay to acquire the
shares. Compensation cost for variable plan share options is measured each period using the intrinsic value method until the variable or performance features of the plan become fixed. Compensation expense is recognized over the applicable vesting
period.



Shares purchased by the trustees in connection with the Telewest
Restricted Share Scheme and certain LTIP awards, are valued at cost and are reflected as a reduction of shareholders equity in the consolidated balance sheet. This equity account is reduced when the shares are issued to employees based on the
original cost of the shares to the trustees.



Earnings per share



Basic earnings per share has been computed by dividing net loss available
to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed by adjusting the weighted average number of ordinary shares outstanding during the year for all dilutive
potential ordinary shares outstanding during the year and adjusting the net loss for any changes in income or loss that would result from the conversion of such potential ordinary shares. There is no difference in net loss and number of shares used
for basic and diluted net loss per ordinary share, as potential ordinary share equivalents for employee share options and convertible debt are not included in the computation as their effect would be to decrease the loss per share. The number of
potential ordinary shares was 393 million, 393 million and 464 million in 2002, 2001 and 2000, respectively.



Inventories



Inventories of equipment,
held for use in the maintenance and expansion of the Groups telecommunications systems, are stated at cost, including appropriate overheads, less provision for deterioration and obsolescence. Network capacity and ducting held for resale are
stated at the lower of cost and net realizable value.



New Accounting
Standards Applicable to the Group



SFAS 143 Accounting for Asset
Retirement Obligations



In July 2001, the FASB issued SFAS 143,
Accounting for Asset Retirement Obligations. SFAS 143, which is effective for fiscal years beginning after June 15, 2002, requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it
is incurred. When the liability is initially recorded, an entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.



Telewest has evaluated its legal retirement obligations in relation to all of its tangible
long-lived assets and specifically in relation to the buildings that it occupies and its network assets. Buildings, which are held under operating leases, do not specify a fixed refurbishment payment, but instead specify a standard of physical
restoration for which Telewest is responsible. Telewest attempts to maintain properties on an ongoing basis to the standard required by the lease and consequently would not expect to have significant additional relevant obligations in respect of its
leased properties. Also Telewest believes that it has no legal or constructive retirement obligations in relation to its network assets, all located in the United Kingdom, as there is no legal requirement for Telewest to retire such assets. The
Group does not therefore believe the adoption of SFAS 143 will have a material impact on the financial statements.



F-12



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



SFAS 145 Rescission of FASB Statements 4, 44 and 64, Amendment of FASB 13, and Technical Corrections



In April 2002, the FASB issued SFAS 145, Rescission of FASB
Statements 4, 44 and 64, Amendment of FASB 13, and Technical Corrections. SFAS 145 provides for the rescission of several previously issued accounting standards, new accounting guidance for the accounting for certain lease modifications
and various technical corrections that are not substantive in nature to existing pronouncements. The Group has adopted this standard from January 1, 2002 and reclassified £15 million from extraordinary items to expense for the year ended
December 31, 2001. No material adjustments have been required in 2002.



SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities



In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 is effective for exit or disposal activities that are initiated after December 31,
2002, and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3 Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
SFAS 146 applies to costs associated with an exit activity that do not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS 144 Accounting for the Impairment or Disposal of Long-Lived
Assets. The Group does not believe the adoption of this statement will have a material impact on its financial position or results of operations.



SFAS 148 Accounting for Stock Based CompensationTransition and Disclosure



An amendment of SFAS 123 is effective for the Group for the year ended December 31, 2002. SFAS 148 permits two additional transition methods
for entities that adopt the fair value based method of accounting for stock-based employee compensation. The Statement also requires new disclosures about the ramp-up effect of stock-based employee compensation on reported results and that those
effects be disclosed more prominently by specifying the form, content, and location of those disclosures. The Group has adopted the disclosure provisions of the Statement in these financial statements. The Group has not adopted the fair value based
method of accounting for stock-based employee compensation and still accounts for these in accordance with APB Opinion 25, Accounting for Stock Issued to Employees.



Other new standards



In November 2002, the Emerging Issues Task Force issued its consensus on EITF 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21) on an approach to
determine whether an entity should divide an arrangement with multiple deliverables into separate units of accounting. According to the EITF, in an arrangement with multiple deliverables, the delivered item(s) should be considered a separate unit of
accounting if all of the following criteria are met: (1) the delivered item(s) has value to the customer on a standalone basis, (2) there is objective and reliable evidence of the fair value of the undelivered item(s), and (3) if the arrangement
includes a general right of return, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the vendor. If all the conditions above are met and there is objective and reliable evidence of fair
value for all units of accounting in an arrangement, the arrangement consideration should be allocated to the separate units of accounting based on their relative fair values. The guidance in this Issue is effective for revenue arrangements entered
into in fiscal years beginning after June 15, 2003. The Group believes that the adoption of EITF 00-21 will not have a material impact on the Groups financial statements.



In November 2002, the FASB issued FASB Interpretation 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others (FIN 45), which addresses the disclosure to be made by a guarantor in its financial statements about its obligations under guarantees. FIN 45 also requires the recognition of a
liability by a guarantor at the inception of certain guarantees. It requires the guarantor to recognize a liability for the non-contingent component of the guarantee, this is the obligation to stand ready to perform in the event that specified
triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at inception. The recognition of the liability is required even if it is not probable that payments will be required under the
guarantee or if the



F-13



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



guarantee was issued with a premium payment or as part of a transaction with multiple elements. The Group has adopted the disclosure requirements and will
apply the recognition and measurement provisions for all guarantees entered into or modified after December 31, 2002. To date the Company has not entered into or modified guarantees.



In January 2003, the FASB issued FASB Interpretation 46, Consolidation of Variable Interest Entities (FIN 46) which interprets
Accounting Research Bulletin (ARB) 51, Consolidated Financial Statements. FIN 46 clarifies the application of ARB 51 with respect to the consolidation of certain entities (variable interest entities  VIEs) to which the usual
condition for consolidation described in ARB 51 does not apply because the controlling financial interest in VIEs may be achieved through arrangements that do not involve voting interests. In addition, FIN 46 requires the primary beneficiary of VIEs
and the holder of a significant variable interest in VIEs to disclose certain information relating to their involvement with the VIEs. The provisions of FIN 46 apply immediately to VIEs created after January 31, 2003, and to VIEs in which an
enterprise obtains an interest after that date. FIN 46 applies in the first fiscal year beginning after June 15, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. To comply with the transitional
provisions of FIN 46, Telewest has evaluated its existing structures to determine whether it is reasonably likely that it would be required to consolidate or disclose information about a VIEs nature, purpose, size and activities, together with
Telewests maximum exposure to loss. Telewest is also required to disclose the anticipated impact of adoption of FIN 46 on its financial statements.



Telewest has 50% joint venture interests in two affiliates, UKTV, a joint venture with the BBC, and Front Row Television Limited (Front Row), a joint venture
with NTL, both of which are accounted for under the equity method, and neither of which are considered VIEs. Management believes that both UKTV and Front Row are businesses as defined by EITF 98-3, Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a Business, and FIN 46, Consolidation of Variable Interest Entities (Revised December 2003), and, accordingly, does not consider that either consolidation or additional disclosures
are required. Telewest does not otherwise make use of traditional VIE structures in its business and does not currently securitize its receivables or other financial assets. The Group does not therefore believe that the impact of the adoption of FIN
46 will have a material effect on its financial statements.

5    FINANCIAL INSTRUMENTS



The Group holds derivative financial instruments solely to hedge specific risks and does not
hold such instruments for trading purposes. The derivatives are held to hedge against the variability in cash flows arising from the effect of fluctuations of GBP:USD exchange rate on the Groups US Dollar-denominated debt and from changes in
interest rates on its variable rate bank debt.



The Group maintains risk
management control systems to monitor currency exchange and interest rate risk attributable to forecasted debt principal payments and interest rate exposure.



Cash flow hedges



Hedges of US Dollar denominated debt



The Group has issued US Dollar denominated debt instruments with a range of maturities. The Group previously hedged the principal amounts of these instruments up to their first call dates or other such dates where the Group may at its
option redeem the instrument before maturity.



The Group has increased its
foreign exchange risk since the discontinuation of hedge accounting as described below. The Group continues to monitor this risk until the Financial Restructuring is completed when the US Dollar-denominated debt instruments will be swapped for
equity and the foreign exchange risk is minimised.



In the three-month period
ended March 31, 2002, the Group determined that it was probable that forecasted future prepayments of principal against outstanding US Dollar-denominated debt would not occur. Accordingly,



F-14



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



the cumulative adjustment in OCI of £53 million resulting from marking to market the derivative instruments has been reclassified from OCI to foreign
exchange gains in the Statement of Operations. Subsequent adjustments of the carrying value of these instruments to fair value are taken directly to the Statement of Operations as incurred.



In the nine-month period ended September 30, 2002, the Group had the ability to terminate
in-the-money derivative contracts that fluctuate in value. Such derivative contracts hedged our exposure to fluctuations in the US Dollar/pound sterling exchange rates on the Groups US Dollar-denominated debt. In March 2002, the Group
terminated certain of these derivative contracts with a nominal value of $999 million (£688 million), netting £74 million cash inflow. In May 2002 the Group terminated further derivative contracts with a nominal value of $367 million
(£253 million) realizing an additional £30 million cash inflow. In the three-month period ended September 30, 2002, the Group terminated arrangements with a nominal value of $2.3 billion (approximately £1.5 billion). Contracts with
a nominal value of $1 billion were settled in cash resulting in an outflow of £28 million. The remaining contracts with a nominal value of $1.3 billion have yet to be settled for a total cost of £33 million of which £19 million was
due on October 1, 2002, but the Company deferred such payment and is considering the payment in the context of its Financial Restructuring.



During the 12-month period ended December 31, 2002, the Group recorded a net £48 million transfer from cumulative OCI to the Statement of Operations arising from
the dedesignation of derivative contracts as ineffective hedges, as described above. In the 12-month period ended December 31, 2001, the Group recorded a £36 million gain in fair value to cumulative OCI, consisting of a loss of £25
million to short-term derivative liabilities and a £61 million gain to long-term derivative assets.



Hedges of variable rate debt



As
described in note 16 to the consolidated financial statements, the Group has a Senior Secured Facility with a syndicate of banks and a further amount from an Institutional Tranche (Institutional Tranche). Drawdowns under the Senior
Secured Facility and the Institutional Tranche bear interest at 0.75% to 2.00% above LIBOR and up to 4% above LIBOR respectively, so the Group is exposed to variable cash flows arising from changes in LIBOR. The Group hedges these variable cash
flows by the use of interest rate swaps. The interest rate swaps can be summarised as follows:



|                    |  |                        |  |                    |  |               |  |                 
|------------------- |  | ---------------------- |  | ------------------ |  | ------------- |  | ----------------
|Effective dates     |  | Maturities             |  | Notional principal |  | Receives      |  | Pays            
|                   
|1/2/1997  7/1/2002 |  | 12/31/2003  3/31/2005 |  | £900m              |  | 6-month LIBOR |  | 5.475%  7.3550%
|                   



In June 2002, the Group reviewed the
effectiveness as hedges of the derivative instruments hedging our exposure to fluctuations in interest rates on its long-term bank debt. The review concluded that continued designation of these instruments as hedges was no longer appropriate and
hedge accounting was discontinued with immediate effect. The dedesignation of these instruments as hedges resulted in a transfer of £7 million from cumulative OCI to interest expense within the Statement of Operations. Any movements in the
value of the derivatives after June 2002 are recorded within interest expense.



The Group continues to hedge some of its interest rate risk on its Senior Secured Facility through the use of interest rate swaps. The purpose of the derivative instruments is to provide a measure of stability over the Companys
exposure to movements in sterling interest rates on its sterling denominated bank debt.



Fair value of financial instruments



SFAS 107, Disclosures
about Fair Value of Financial Instruments requires disclosure of an estimate of the fair values of financial instruments. SFAS 107 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties other than in a forced sale. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective
in nature and involve uncertainties and matters of



F-15



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



significant judgement, and therefore cannot be determined precisely. Changes in assumptions could significantly affect the estimates.



At December 31, 2002 the Groups significant financial instruments include cash and cash
equivalents, trade receivables, interest rate swaps, trade payables and short-term and long-term debt instruments. The following table summarizes the fair value of certain instruments held by and obligations of the Group. The fair value of the other
financial instruments held by the Group approximates their recorded carrying amount due to the short maturity of these instruments and these instruments are not presented in the following table:



|                                    |  |                |   |  |                     |   |  |                |   |  |                     |  
|----------------------------------- |  | -------------- | - |  | ------------------- | - |  | -------------- | - |  | ------------------- | -
|                                    |  |                |   |  | At December 31,2002 |   |  |                |   |  | At December 31,2001 |  
|                                    |  | Carryingamount |   |  | Fair value          |   |  | Carryingamount |   |  | Fair value          |  
|                                    |  | £ million      |   |  | £ million           |   |  | £ million      |   |  | £ million           |  
|                                    | 
|Financial instruments  assets      |  |                |   |  |                     |   |  |                |   |  |                     |  
|Foreign exchange forward contracts  |  |               |   |  |                    |   |  | 131            |   |  | 131                 |  
|Foreign currency swaps              |  |               |   |  |                    |   |  | 15             |   |  | 15                  |  
|                                    | 
|Financial instruments  liabilities |  |                |   |  |                     |   |  |                |   |  |                     |  
|Interest rate swap agreements       |  | (34            | ) |  | (34                 | ) |  | (25            | ) |  | (25                 | )
|Foreign exchange forward contracts  |  |               |   |  |                    |   |  | (4             | ) |  | (4                  | )
|                                    | 
|Debt obligations                    |  |                |   |  |                     |   |  |                |   |  |                     |  
|Accreting Convertible Notes 2003    |  | 282            |   |  | 62                  |   |  | 268            |   |  | 268                 |  
|Senior Convertible Notes 2005       |  | 311            |   |  | 130                 |   |  | 344            |   |  | 234                 |  
|Senior Debentures 2006              |  | 186            |   |  | 39                  |   |  | 206            |   |  | 155                 |  
|Senior Convertible Notes 2007       |  | 300            |   |  | 63                  |   |  | 300            |   |  | 174                 |  
|Senior Discount Debentures 2007     |  | 955            |   |  | 200                 |   |  | 1,059          |   |  | 803                 |  
|Senior Notes 2008                   |  | 217            |   |  | 46                  |   |  | 226            |   |  | 185                 |  
|Senior Discount Notes 2009          |  | 563            |   |  | 108                 |   |  | 505            |   |  | 308                 |  
|Senior Notes 2010                   |  | 394            |   |  | 83                  |   |  | 378            |   |  | 315                 |  
|Senior Discount Notes 2010          |  | 222            |   |  | 46                  |   |  | 185            |   |  | 136                 |  
|Senior Secured Facility             |  | 2,000          |   |  | 2,000               |   |  | 1,360          |   |  | 1,360               |  
|Other debt                          |  | 20             |   |  | 20                  |   |  | 66             |   |  | 66                  |  
|                                    | 



The estimated fair values of the
financial instruments specified above are based on quotations received from independent, third-party financial institutions and represent the net amounts receivable or payable to terminate the position. The estimated fair values of the Debentures
and Notes are also based on quotations from independent third-party financial institutions and are based on discounting the future cash flows to net present values using appropriate market interest rates prevailing at the year end.



Market risk and concentrations of credit risk



Market risk is the sensitivity of the value of the financial instruments to changes in
related currency and interest rates.



As described above, the Group terminated
its portfolio of derivative financial instruments which were used to hedge its exposure to fluctuations in the USD : GBP exchange rate. Consequently the Group is exposed to fluctuations in the value of its US Dollar-denominated debt obligations.



Generally, the Group is not exposed to such market risk arising on its
interest rate derivative financial instruments because gains and losses on the underlying assets and liabilities offset gains and losses on the financial instruments.



F-16



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



The Group may be exposed to potential losses due to the credit risk of non-performance by the financial institution
counterparties to its portfolio of derivative financial instruments. However such losses are not anticipated as these counterparties are major international financial institutions and the portfolio is spread over a wide range of institutions.



Temporary cash investments also potentially expose the Group to concentrations
of credit risk, as defined by SFAS 133. At December 31, 2002 the Group had £160 million on deposit with a major international financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Groups customer base.



6    IMPAIRMENT OF ASSETS AND GOODWILL



During the year ended December 31, 2002, the Group undertook an impairment review of its network assets, of goodwill arising on recent acquisitions and of its investments in affiliates acquired in recent years. The review covered the Cable
and Content reporting units. The principal reasons for the review were: a share price decline indicative of a fall in the values of the underlying assets and a softening of the ad-sales market, declining revenue growth and a lower than expected
customer take-up of additional services.



The review found evidence of
impairment in the value of goodwill arising on the core Cable and Content reporting units and in the value of the affiliated undertaking UKTV. The carrying amounts of goodwill, fixed assets and the investments in the affiliated undertakings were
written down to fair value, resulting in a charge of £1,445 million against goodwill, an impairment of £841 million against fixed assets and a charge of £88 million against the investments in affiliated undertakings. These charges
have been included in the statement of operations within impairment of goodwill, impairment of fixed assets and share of net losses of affiliates and impairment, respectively. The estimated fair value of the goodwill and the investment in UKTV was
based on projected future cash flows at a post-tax discount rate of 11.5% which the Group believes is commensurate with the risks associated with the assets. The projected future cash flows were determined using the Companys ten-year plan for
the business, with a terminal value which takes into account analysts and other published projections of future trends across pay-TV platforms, including the total television advertising market.



The changes in the carrying amount of goodwill for the years ended December 31, 2002 and 2001
by reporting unit are as follows:



|                                |  |                 |   |  |                   |   |  |                 |  
|------------------------------- |  | --------------- | - |  | ----------------- | - |  | --------------- | -
|                                |  | Cable £ million |   |  | Content £ million |   |  | Total £ million |  
|                                | 
|Balance as of January 1, 2001   |  | 1,394           |   |  | 1,409             |   |  | 2,803           |  
|Addition in year                |  | 11              |   |  |                  |   |  | 11              |  
|Amortization in year            |  | (83             | ) |  | (73               | ) |  | (156            | )
|Impairment of goodwill          |  |                |   |  | (766              | ) |  | (766            | )
|                                | 
|Balance as of January 1, 2002   |  | 1,322           |   |  | 570               |   |  | 1,892           |  
|Impairment of goodwill          |  | (1,016          | ) |  | (429              | ) |  | (1,445          | )
|                                | 
|Balance as of December 31, 2002 |  | 306             |   |  | 141               |   |  | 447             |  
|                                | 



F-17



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Amortization expense related to goodwill was £183 million (including £27 million related to equity
investment goodwill) for the year ended December 31, 2001 (£147 million for the year ended December 31, 2000). The following table reconciles previously reported net income as if the provisions of SFAS 142 were in effect in 2001 and 2000:



|                                  |  |              |   |  |           |   |  |           |  
|--------------------------------- |  | ------------ | - |  | --------- | - |  | --------- | -
|                                  |  | 2002Restated |   |  | 2001      |   |  | 2000      |  
|                                  |  | £ million    |   |  | £ million |   |  | £ million |  
|                                  | 
|Net loss Reported net loss        |  | (2,789       | ) |  | (1,741    | ) |  | (755      | )
|Add back amortization of goodwill |  |             |   |  | 183       |   |  | 147       |  
|                                  | 
|Adjusted net loss                 |  | (2,789       | ) |  | (1,558    | ) |  | (608      | )
|                                  | 

|                                                                 |  |       |   |  |       |   |  |       |  
|---------------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                 |  | Pence |   |  | Pence |   |  | Pence |  
|                                                                 | 
|Basic and diluted net loss per share Reported net loss per share |  | (97   | ) |  | (60   | ) |  | (28   | )
|Add back amortization of goodwill                                |  |      |   |  | 6     |   |  | 5     |  
|                                                                 | 
|Adjusted net loss per share                                      |  | (97   | ) |  | (54   | ) |  | (23   | )
|                                                                 | 



7    BUSINESS
COMBINATIONS



On May 30, 2001, the Group acquired 51% of the issued share
capital of Rapid Travel Solutions Limited (Rapid Travel) and was granted a series of call options by, and granted a series of put options to, the vendors in respect of the balance of 49%. Assuming that either party exercises these
options, the Group will acquire the remainder of the share capital in tranches ending on November 30, 2003 for total consideration of £4 million. The acquisition has been accounted for using the purchase method of accounting. Goodwill arising
on the acquisition was £7 million.



If the Group had acquired Rapid
Travel at the beginning of 2000 and 2001, the Groups results would not have been materially different from the actual results as disclosed in these financial statements.



On April 19, 2000 the Company acquired the entire issued share capital of Flextech Plc (Flextech), a company engaged in
broadcast media activities, for a total consideration of £1,978 million. This comprised 601 million shares of 10p each and acquisition costs of £31 million. The value attributed to the shares issued was 323.85 pence per share, being the
average share market price for a five day period around December 17, 2000, the day the terms of the acquisition were agreed to and announced. The acquisition was accounted for using the purchase method of accounting. The goodwill arising on
acquisition of Flextech was £1,382 million. As described in note 16, the Group has undertaken an impairment review of goodwill. As a result of the review, a charge of £429 million has been made.



On November 1, 2000 the Company acquired the entire issued share capital of Eurobell
(Holdings) PLC (Eurobell), from Deutsche Telekom (DT) and agreed to pay initial and deferred consideration to DT, (as discussed below), in the form of 5% Accreting Convertible Notes due 2003. The aggregate principal amount of
such Notes, following agreement of the deferred consideration, is £254 million. The terms of the Accreting Convertible Notes are described in note 16 to these financial statements.



Upon completion of the acquisition, the Company issued a £220 million Accreting Convertible Note to DT in consideration for:



|· | Eurobells entire issued share capital, £72 million
|- | ---------------------------------------------------



|· | the assignment of an inter-company loan previously owed by Eurobell to DT, £128 million, and
|- | --------------------------------------------------------------------------------------------



|· | a cash payment remitted to Eurobell by DT shortly after the acquisition, £20 million.
|- | -------------------------------------------------------------------------------------



Subsequently, on January 15, 2001 DT remitted a further cash payment, £30 million, to Eurobell and the Company issued an additional
Accreting Convertible Note to DT for £30 million.



F-18



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



In addition under the terms of the acquisition, the Company was obliged to provide deferred consideration, contingent
on Eurobells turnover for the year ended December 31, 2000 exceeding a certain target. As a result, an additional £3.5 million Accreting Convertible Note, dated April 2, 2001 was issued to DT. This deferred consideration was accrued for
at December 31, 2000.



Goodwill of £1 million arose on the acquisition.



If the Company had acquired Flextech and Eurobell on January 1, 2000 the
Groups net loss of £755 million and loss per share of £0.28 would have been £820 million and £0.28, respectively.



8    SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS



Cash paid for interest was £287 million, £335 million and £164 million for the years ended December 31, 2002, 2001 and
2000, respectively.



During 2002 there were no significant non-cash investing
activities. The amounts stated for 2001 represent the purchase of Rapid Travel. The amounts stated for 2000 represent the purchase of Flextech and Eurobell. These transactions are described in note 7 to the consolidated financial statements.



|                                                |  |                        |  |                |   |  |                |  
|----------------------------------------------- |  | ---------------------- |  | -------------- | - |  | -------------- | -
|                                                |  | Year ended December 31 | 
|                                                |  | 2002 £ million         |  | 2001 £ million |   |  | 2000 £ million |  
|                                                | 
|Acquisitions:                                   |  |                        |  |                |   |  |                |  
|Assets                                          |  |                       |  | 1              |   |  | 1,104          |  
|Liabilities assumed                             |  |                       |  | (2             | ) |  | (172           | )
|Debt assumed                                    |  |                       |  |               |   |  | (261           | )
|                                                | 
|Net (liabilities)/assets (contributed)/ assumed |  |                       |  | (1             | ) |  | 671            |  
|Less:                                           |  |                        |  |                |   |  |                |  
|Goodwill arising                                |  |                       |  | 7              |   |  | 1,383          |  
|                                                | 
|                                                |  |                       |  | 6              |   |  | 2,054          |  
|                                                | 
|                                                |  |                        | 
|Share consideration/capital contribution        |  |                       |  |               |   |  | 1,946          |  
|Debt consideration                              |  |                       |  |               |   |  | 75             |  
|Purchase of shares                              |  |                       |  | 2              |   |  |               |  
|Option consideration                            |  |                       |  | 4              |   |  |               |  
|Direct costs of acquisition                     |  |                       |  |               |   |  | 33             |  
|                                                | 
|                                                |  |                       |  | 6              |   |  | 2,054          |  
|                                                | 



In 2002 the Group entered into capital
lease obligations with a total capital value of £17 million. The Group entered into no vendor financing arrangements during the year, but had a remaining financed balance of £11 million at December 31, 2002. At December 31, 2002, the
Group had accrued a further £57 million of capital expenditure for property and equipment.



9    OTHER RECEIVABLES



|                            |  |           |  |               
|--------------------------- |  | --------- |  | --------------
|                            |  |           |  | At December 31
|                            |  | 2002      |  | 2001          
|                            |  | £ million |  | £ million     
|                           
|Interconnection receivables |  | 7         |  | 2             
|Accrued income              |  | 32        |  | 68            
|Other                       |  | 29        |  | 27            
|Foreign currency swap       |  |          |  | 15            
|                           
|                            |  | 68        |  | 112           
|                           



Accrued income primarily represents
telephone calls made by Cable Division subscribers and Business Services Division customers that have not been billed as at the accounting period end. The period of time over which billings have not been billed varies between two days and four
weeks.



F-19



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



10    INVESTMENTS



The Group has investments in affiliates accounted for under the equity method at December 31, 2002 and 2001 as follows:



|                             |  |                                     |   |  |      |  
|---------------------------- |  | ----------------------------------- | - |  | ---- | -
|                             |  | Percentage ownership at December 31 |  
|                             |  | 2002                                |   |  | 2001 |  
|                             | 
|Front Row Television Limited |  | 50.0                                | % |  | 50.0 | %
|UKTV                         |  | 50.0                                | % |  | 50.0 | %
|Blue Yonder Workwise Limited |  | 100.0                               | % |  | 70.0 | %
|SMG                          |  |                                    |   |  | 16.9 | %
|                             | 



During the year Blue Yonder Workwise
Limited became a wholly owned subsidiary of the Group. No goodwill arose on the acquisition.



Summarized combined financial information for such affiliates which operate principally in the cable television, broadcasting and interactive media industries is as follows:



|                             |  |  |  |           |   |  |                |  
|---------------------------- |  |  |  | --------- | - |  | -------------- | -
|                             |  |  |  |           |   |  | At December 31 |  
|                             |  |  |  | 2002      |   |  | 2001           |  
|                             |  |  |  | £ million |   |  | £ million      |  
|                             | 
|Combined financial position  |  |  |  |           |   |  |                |  
|Current assets               |  |  |  | 61        |   |  | 162            |  
|Property and equipment, net  |  |  |  |          |   |  | 54             |  
|Intangible assets, net       |  |  |  |          |   |  | 112            |  
|Other assets, net            |  |  |  | 31        |   |  | 7              |  
|                             | 
|Total assets                 |  |  |  | 92        |   |  | 335            |  
|                             | 
|Current liabilities          |  |  |  | 42        |   |  | 133            |  
|Debt                         |  |  |  | 176       |   |  | 66             |  
|Other liabilities            |  |  |  |          |   |  | 557            |  
|Owners equity               |  |  |  | (126      | ) |  | (421           | )
|                             | 
|Total liabilities and equity |  |  |  | 92        |   |  | 335            |  
|                             | 

|                                                                |  |           |   |  |                        |   |  |                |  
|--------------------------------------------------------------- |  | --------- | - |  | ---------------------- | - |  | -------------- | -
|                                                                |  |          
|                                                                |  |           |   |  | Year ended December 31 |  
|                                                                |  | 2002      |   |  | 2001                   |   |  | 2000           |  
|                                                                |  | £ million |   |  | £ million              |   |  | £ million      |  
|                                                                | 
|Combined operations                                             |  |           |   |  |                        |   |  |                |  
|Revenue                                                         |  | 128       |   |  | 408                    |   |  | 406            |  
|Operating expenses                                              |  | (103      | ) |  | (324                   | ) |  | (343           | )
|                                                                | 
|Operating profit                                                |  | 25        |   |  | 84                     |   |  | 63             |  
|Interest expense                                                |  | (12       | ) |  | (38                    | ) |  | (30            | )
|                                                                | 
|Net profit                                                      |  | 13        |   |  | 46                     |   |  | 33             |  
|                                                                | 
|                                                                |  |           |  
|                                                                |  |           |   |  |                        |   |  | At December 31 |  
|                                                                |  |           |   |  | 2002                   |   |  | 2001           |  
|                                                                |  |           |   |  | £ million              |   |  | £ million      |  
|                                                                | 
|The Groups investments in affiliates are comprised as follows: |  |           |   |  |                        |   |  |                |  
|Goodwill                                                        |  |           |   |  |                       |   |  | 27             |  
|Loans                                                           |  |           |   |  | 208                    |   |  | 260            |  
|Share of net assets                                             |  |           |   |  | 168                    |   |  | 260            |  
|                                                                | 
|                                                                |  |           |   |  | 376                    |   |  | 547            |  
|                                                                | 



On September 4, 2002 the investment in
SMG plc, a listed investment in an associated undertaking, was reclassified as a current asset investment at net realizable value. This resulted in £42 million being written off the carrying value of the investment. The investment in SMG plc
was subsequently sold in November 2002 realizing a gain of £1 million.





F-20



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



11    PROPERTY AND EQUIPMENT



|                             |  |           |  |           |   |  |                  |  |                     |  |                |   |  |           |  
|---------------------------- |  | --------- |  | --------- | - |  | ---------------- |  | ------------------- |  | -------------- | - |  | --------- | -
|                             |  | Land      |  | Buildings |   |  | Cable andducting |  | Electronicequipment |  | Otherequipment |   |  | Total     |  
|                             |  | £ million |  | £ million |   |  | £ million        |  | £ million           |  | £ million      |   |  | £ million |  
|                             | 
|Acquisition costs            |  |           |  |           |   |  |                  |  |                     |  |                |   |  |           |  
|Balance at January 1, 2002   |  | 6         |  | 133       |   |  | 3,186            |  | 1,424               |  | 597            |   |  | 5,346     |  
|Additions                    |  |          |  | 7         |   |  | 269              |  | 135                 |  | 50             |   |  | 461       |  
|Disposals                    |  |          |  | (2        | ) |  |                 |  |                    |  | (11            | ) |  | (13       | )
|                             | 
|Balance at December 31, 2002 |  | 6         |  | 138       |   |  | 3,455            |  | 1,559               |  | 636            |   |  | 5,794     |  
|                             | 
|Accumulated depreciation     |  |           |  |           |   |  |                  |  |                     |  |                |   |  |           |  
|Balance at January 1, 2002   |  |          |  | 45        |   |  | 894              |  | 661                 |  | 273            |   |  | 1,873     |  
|Charge for the year          |  |          |  | 10        |   |  | 159              |  | 223                 |  | 103            |   |  | 495       |  
|Impairment                   |  |          |  | 39        |   |  | 678              |  | 90                  |  | 34             |   |  | 841       |  
|Disposals                    |  |          |  | (2        | ) |  |                 |  |                    |  | (11            | ) |  | (13       | )
|                             | 
|Balance at December 31, 2002 |  |          |  | 92        |   |  | 1,731            |  | 974                 |  | 399            |   |  | 3,196     |  
|                             | 
|2002 Net book value          |  | 6         |  | 46        |   |  | 1,724            |  | 585                 |  | 237            |   |  | 2,598     |  
|                             | 
|                             |  |           |  |           |   | 
|Acquisition costs            |  |           |  |           |   |  |                  |  |                     |  |                |   |  |           |  
|Balance at January 1, 2001   |  | 6         |  | 119       |   |  | 2,630            |  | 1,393               |  | 552            |   |  | 4,700     |  
|Additions                    |  |          |  | 14        |   |  | 556              |  | 31                  |  | 52             |   |  | 653       |  
|Disposals                    |  |          |  |          |   |  |                 |  |                    |  | (7             | ) |  | (7        | )
|                             | 
|Balance at December 31, 2001 |  | 6         |  | 133       |   |  | 3,186            |  | 1,424               |  | 597            |   |  | 5,346     |  
|                             | 
|Accumulated depreciation     |  |           |  |           |   |  |                  |  |                     |  |                |   |  |           |  
|Balance at January 1, 2001   |  |          |  | 35        |   |  | 546              |  | 605                 |  | 225            |   |  | 1,411     |  
|Charge for the year          |  |          |  | 10        |   |  | 348              |  | 56                  |  | 55             |   |  | 469       |  
|Disposals                    |  |          |  |          |   |  |                 |  |                    |  | (7             | ) |  | (7        | )
|                             | 
|Balance at December 31, 2001 |  |          |  | 45        |   |  | 894              |  | 661                 |  | 273            |   |  | 1,873     |  
|                             | 
|2001 Net book value          |  | 6         |  | 88        |   |  | 2,292            |  | 763                 |  | 324            |   |  | 3,473     |  
|                             | 



Cable and ducting consists principally
of civil engineering and fiber optic costs. In addition, cable and ducting includes net book value of pre-construction and franchise costs of £18 million and £14 million as of December 31, 2002 and 2001, respectively. Electronic
equipment includes the Groups switching, headend and converter equipment. Other equipment consists principally of motor vehicles, office furniture and fixtures and leasehold improvements.



12    VALUATION AND QUALIFYING ACCOUNTS



|     |  |                                   |  |                     |  |                            |  |                                      |  |            |   |  |                      
|---- |  | --------------------------------- |  | ------------------- |  | -------------------------- |  | ------------------------------------ |  | ---------- | - |  | ---------------------
|     |  |                                   |  | Balance atJanuary 1 |  | Acquisition ofsubsidiaries |  | Additionscharged tocosts andexpenses |  | Deductions |   |  | Balance atDecember 31
|     |  |                                   |  | £ million           |  | £ million                  |  | £ million                            |  | £ million  |   |  | £ million            
|    
|2002 |  | Deferred tax valuation allowances |  | 901                 |  |                           |  | 382                                  |  |           |   |  | 1,283                
|     |  | Allowance for doubtful accounts   |  | 16                  |  |                           |  |                                     |  | (4         | ) |  | 12                   
|    
|2001 |  | Deferred tax valuation allowances |  | 733                 |  |                           |  | 168                                  |  |           |   |  | 901                  
|     |  | Allowance for doubtful accounts   |  | 19                  |  |                           |  | 3                                    |  | (6         | ) |  | 16                   
|    
|2000 |  | Deferred tax valuation allowances |  | 491                 |  | 38                         |  | 204                                  |  |           |   |  | 733                  
|     |  | Allowance for doubtful accounts   |  | 13                  |  | 5                          |  | 14                                   |  | (13        | ) |  | 19                   
|    





F-21



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



13    OTHER ASSETS



|                                                                                                                                              |  |                        |  |                              
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- |  | -----------------------------
|The components of other assets, net of amortization and write offs, are as follows:                                                           |  | At December 31        
|                                                                                                                                              |  | 2002Restated£ million  |  | 2001£ million                
|                                                                                                                                             
|Deferred financing costs of debentures                                                                                                        |  |                       |  | 22                           
|Deferred financing costs of Senior Secured Facility                                                                                           |  | 29                     |  | 36                           
|                                                                                                                                             
|                                                                                                                                              |  | 29                     |  | 58                           
|                                                                                                                                             
|                                                                                                                                              |  |                       
|During the year £11 million of deferred financing costs of debentures were written off in connection with bond debt default.  14    INVENTORY |  |                        |  |                              
|                                                                                                                                              |  | 2002 £ million         |  | At December 31 2001 £ million
|                                                                                                                                             
|Raw materials and consumables                                                                                                                 |  |                       |  | 1                            
|Inventories of spare capacity and duct held for resale                                                                                        |  | 4                      |  | 36                           
|Programming inventory                                                                                                                         |  | 24                     |  | 30                           
|                                                                                                                                             
|                                                                                                                                              |  | 28                     |  | 67                           
|                                                                                                                                             
|                                                                                                                                              |  |                       
|15    OTHER LIABILITIES                                                                                                                       |  |                        |  |                              
|Other liabilities are summarized as follows:                                                                                                  |  |                        |  | At December 31               
|                                                                                                                                              |  | 2002Restated £ million |  | 2001 £ million               
|                                                                                                                                             
|Deferred income                                                                                                                               |  | 111                    |  | 114                          
|Accrued construction costs                                                                                                                    |  | 64                     |  | 67                           
|Accrued programming costs                                                                                                                     |  | 21                     |  | 24                           
|Accrued interconnect costs                                                                                                                    |  | 17                     |  | 39                           
|Accrued interest                                                                                                                              |  | 222                    |  | 111                          
|Accrued staff costs                                                                                                                           |  | 10                     |  | 35                           
|Accrued expenses                                                                                                                              |  | 42                     |  | 41                           
|Other liabilities                                                                                                                             |  | 146                    |  | 93                           
|                                                                                                                                             
|                                                                                                                                              |  | 633                    |  | 524                          
|                                                                                                                                             



16    DEBT



Debt is summarized as follows at December 31, 2002 and 2001:



|                                 |  |                                |  |         |  |         |  |           |  |          
|-------------------------------- |  | ------------------------------ |  | ------- |  | ------- |  | --------- |  | ---------
|                                 |  | Weighted average interest rate |  | 2002    |  | 2001   
|                                 |  | 2002                           |  | 2001    |  | 2000    |  | £ million |  | £ million
|                                
|Accreting Convertible Notes 2003 |  | 5%                             |  | 5%      |  | 5%      |  | 282       |  | 268      
|Senior Convertible Notes 2005    |  | 6%                             |  | 6%      |  | 6%      |  | 311       |  | 344      
|Senior Debentures 2006           |  | 9.625%                         |  | 9.625%  |  | 9.625%  |  | 186       |  | 206      
|Senior Convertible Notes 2007    |  | 5.25%                          |  | 5.25%   |  | 5.25%   |  | 300       |  | 300      
|Senior Discount Debentures 2007  |  | 11%                            |  | 11%     |  | 11%     |  | 955       |  | 1,059    
|Senior Notes 2008                |  | 11.25%                         |  | 11.25%  |  | 11.25%  |  | 217       |  | 226      
|Senior Discount Notes 2009       |  | 9.875%                         |  | 9.875%  |  | 9.875%  |  | 287       |  | 261      
|Senior Discount Notes 2009       |  | 9.25%                          |  | 9.25%   |  | 9.25%   |  | 276       |  | 244      
|Senior Notes 2010                |  | 9.875%                         |  | 9.875%  |  | 9.875%  |  | 394       |  | 378      
|Senior Discount Notes 2010       |  | 11.375%                        |  | 11.375% |  | 11.375% |  | 222       |  | 185      
|Senior Secured Facility          |  | 6.223%                         |  | 7.265%  |  | 7.553%  |  | 2,000     |  | 1,360    
|Other debt                       |  | 6.7%                           |  | 6.767%  |  | 7.432%  |  | 20        |  | 66       
|                                
|                                 |  |                                |  |         |  |         |  | 5,450     |  | 4,897    
|                                



F-22



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Notes and debentures



|                                 |  |     |  |                              |  |                       |  |                         |  |              |  
|-------------------------------- |  | --- |  | ---------------------------- |  | --------------------- |  | ----------------------- |  | ------------ | -
|                                 |  |     |  | Principal atmaturity million |  | Original maturitydate |  | Earliest redemptiondate |  | Interestrate |  
|                                 | 
|Accreting Convertible Notes 2003 |  | GBP |  | 294                          |  | November 1, 2003      |  | November 1, 2003        |  | 5            | %
|Senior Convertible Notes 2005    |  | USD |  | 500                          |  | July 7, 2005          |  | July 7, 2003            |  | 6            | %
|Senior Debentures 2006           |  | USD |  | 300                          |  | October 1, 2006       |  | October 1, 2000         |  | 9.625        | %
|Senior Convertible Notes 2007    |  | GBP |  | 300                          |  | February 19, 2007     |  | March 9, 2003           |  | 5.25         | %
|Senior Discount Debentures 2007  |  | USD |  | 1,537                        |  | October 1, 2007       |  | October 1, 2000         |  | 11           | %
|Senior Notes 2008                |  | USD |  | 350                          |  | November 1,2008       |  | November 1, 2003        |  | 11.25        | %
|Senior Discount Notes 2009       |  | GBP |  | 325                          |  | April 15, 2009        |  | April 15, 2004          |  | 9.875        | %
|Senior Discount Notes 2009       |  | USD |  | 500                          |  | April 15, 2009        |  | April 15, 2004          |  | 9.25         | %
|Senior Notes 2010                |  | GBP |  | 180                          |  | February 1, 2010      |  | February 1, 2005        |  | 9.875        | %
|Senior Notes 2010                |  | USD |  | 350                          |  | February 1, 2010      |  | February 1, 2005        |  | 9.875        | %
|Senior Discount Notes 2010       |  | USD |  | 450                          |  | February 1, 2010      |  | February 1, 2005        |  | 11.375       | %
|                                 | 





The Debentures and Notes are unsecured liabilities of the Group.



The Senior Convertible Notes 2005 are convertible into 114 million ordinary shares of the Group at a conversion price of 288 pence per ordinary share. Conversion is at
the holders option at any time up to the close of business on June 22, 2005. The Senior Convertible Notes 2007 are convertible into 92 million ordinary shares of the Group at a conversion price of 325 pence per ordinary share. Conversion is at
the holders option at any time up to close of business on February 2, 2007. If Notes are called for redemption prior to maturity, each holder has the right to convert Notes into ordinary shares. The Accreting Convertible Notes 2003 are
convertible into 162 million ordinary shares of the Group at an initial conversion price of 156.56 pence per ordinary share. Conversion is at maturity at the holders option, but the Group can elect to settle in cash at any time, in whole but
not in part, at 100% of the accreted value provided that for a certain 10 day period prior to redemption, the price per ordinary share has been at least 130% of the average conversion price in effect on each day during the 10 day period.



On January 15, 2001, DT remitted a cash payment of £30 million to its former
subsidiary Eurobell, under the terms of the acquisition of Eurobell by the Company on November 1, 2000. In consideration the Company issued additional Accreting Convertible Notes 2003 for the same amount. In addition, under the terms of the
acquisition, the Company was obliged to provide deferred consideration, contingent on Eurobells turnover for the year ended December 31, 2000 exceeding a certain target. As a result additional £3.5 million Accreting Convertible Notes
2003, dated April 2, 2001, were issued to DT.



The unamortized portion of the
discounts on issue of the Senior Discount Notes 2009 and Senior Discount Notes 2010 was £73 million and £58 million respectively. The discount on issue is being amortized up to the first call dates of the bonds, such as to produce a
constant rate of return on the carrying amount.



The indentures under which the
Debentures and Notes were issued contain various covenants, which among other things, restrict the ability of the Group to incur additional indebtedness, pay dividends, create certain liens, enter into certain transactions with shareholders or
affiliates, or sell certain assets. As part of its refinancing, the Group elected not to pay: the interest due on October 1, 2002 on its Senior Debentures 2006 and its Senior Discount Debentures 2007; the interest due on November 1, 2002 on its
Senior Notes 2008; and the interest due on January 7, 2003 on its Senior Convertible Notes 2005. The non-payment of interest constitutes a default event under the terms of these four bonds. As a consequence of the non-payment of hedge contracts of
£10.5 million, all of the remaining bonds were also in default as at December 31, 2002.







F-23



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Senior Secured Facility



On March 16, 2001 the Group entered into a new senior secured credit facility (the Senior Secured Facility) with a syndicate of
banks for £2 billion, of which £1,855 million was drawn down at December 31, 2002. The Group is also able to raise a further £250m from institutional investors (the Institutional Tranche) of which £145 million was
drawn down at December 31, 2002. The first drawdowns under the Senior Secured Facility were used to repay amounts owed under the old senior secured credit facilities.



Borrowings under the Senior Secured Facility are secured on the assets of the Group including the partnership interests and shares of
subsidiaries and bear interest at 0.75% to 2.0% over LIBOR (depending on the ratio of borrowings to quarterly, annualized, consolidated net operating cash flow). Borrowings under the Institutional Tranche bear interest at up to 4% above LIBOR.



The Senior Secured Facility contains cross-default clauses with other debt
instruments. As a result of the Group being in default of its Debentures and Notes, it is in default on the Senior Secured Facility. In addition, on March 14, 2003, Telewest notified its Senior Lenders that, as a result of the exceptional items
incurred in 2002 and their impact on Telewests net operating cash flow, it would breach certain financial covenants under its bank facility in respect of the quarter ended December 31, 2002.



The Group is renegotiating its bank facilities and debt financing arrangements. Further
details of the Financial Restructuring are included in note 23.



Vendor
financing



The Group has entered into vendor financing arrangements to
fund its purchase of equipment from certain suppliers. Under the terms of these arrangements the Group defers payment for periods up to 36 months. Interest is charged on these arrangements at a rate that is fixed for the life of the arrangements.
The balance on these arrangements at December 31, 2002 was £11 million.



SMG loan



On July 11, 2001, the Group entered into a contract
with Toronto Dominion Bank (TD), whereby TD provided a loan to the Group, in return for security over 55% of the Groups shareholding in SMG plc. The loan was fully repaid during the year following the sale of the Groups
investment in SMG.



Bank loans



Bank loans are property loans secured on certain freehold land and buildings held by the
Group. The balance at December 31, 2002 was £7 million.



Maturity
Profile



As a consequence of the defaults referred to above, the
Groups long-term debt has been disclosed as repayable within one year. The original Maturity Profile of the Groups long-term debt was as follows:



|                    |  |               
|------------------- |  | --------------
|                    |  |               
|                    |  | 2002 £ million
|                   
|2003                |  | 3,652         
|2004                |  | 1             
|2005                |  | 316           
|2006                |  |              
|2007                |  | 300           
|2008 and thereafter |  | 1,181         
|                   
|                    |  | 5,450         
|                   





F-24



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



17    INCOME TAXES



Loss before income taxes is solely attributable to the United Kingdom.



The provisions for income taxes follow:

|                     |  |                |  |                |  |               
|-------------------- |  | -------------- |  | -------------- |  | --------------
|                     |  | 2002 £ million |  | 2001 £ million |  | 2000 £ million
|                    
|Deferred tax benefit |  | 28             |  | 70             |  | 6             
|                    



A reconciliation of income taxes
determined using the statutory UK rate of 30% (2001: 30%) to the effective rate of income tax is as follows:



|                                    |  |                        |   |  |        |   |  |        |  
|----------------------------------- |  | ---------------------- | - |  | ------ | - |  | ------ | -
|                                    |  | Year ended December 31 |  
|                                    |  | 2002 %                 |   |  | 2001 % |   |  | 2000 % |  
|                                    | 
|Corporate tax at UK statutory rates |  | (30                    | ) |  | (30    | ) |  | (30    | )
|Write down of goodwill              |  | 15                     |   |  |       |   |  |       |  
|Change in valuation allowance       |  | 14                     |   |  | 26     |   |  | 31     |  
|                                    | 
|                                    |  | (1                     | ) |  | (4     | ) |  | 1      |  
|                                    | 



Deferred income tax assets and liabilities at December 31, 2002 and 2001 are summarized as follows:



|                                         |  |                |   |  |                |  
|---------------------------------------- |  | -------------- | - |  | -------------- | -
|                                         |  | 2002 £ million |   |  | 2001 £ million |  
|                                         | 
|Deferred tax assets relating to:         |  |                |   |  |                |  
|Fixed assets                             |  | 763            |   |  | 410            |  
|Net operating loss carried forward       |  | 494            |   |  | 465            |  
|Otherinvestments                        |  | 26             |   |  | 26             |  
|                                         | 
|Deferred tax asset                       |  | 1,283          |   |  | 901            |  
|Valuation allowance                      |  | (1,283         | ) |  | (901           | )
|Investments in affiliates                |  | (85            | ) |  | (113           | )
|                                         | 
|Deferred tax liability per balance sheet |  | (85            | ) |  | (113           | )
|                                         | 



At December 31, 2002 the Group
estimates that it has, subject to Inland Revenue agreement, net operating losses (NOLs) of £1,647 million available to relieve against future profits. This excludes capital allowances on assets which are available to the Group, but
have not been claimed.



A valuation allowance of 100% has been provided due to
a history of operating losses and managements belief that the likelihood of realizing the benefit of the deferred tax asset is not more likely than not.



The NOLs have an unlimited carry forward period under UK tax law, but are limited to their use to the type of business which has generated the loss.



18    SHAREHOLDERS EQUITY



Movement in share capital



On March 31, 2000 the authorized share capital of the Company was increased to £460
million divided into 4,300 million ordinary shares of 10 pence each and 300 million limited voting convertible ordinary shares of 10 pence each.



Between May 5 and July 5, 2000 the Company issued 601 million ordinary shares of 10 pence each in consideration for the entire issued share capital of Flextech. Also in
2000, 4 million ordinary shares of 10 pence each were issued in consideration of £4.6 million on exercise of employee share options.





F-25



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



During 2001 the Company issued 7 million ordinary shares of 10 pence each upon exercise of employee share options.
Total consideration received was £6 million. In addition the Company redesignated 20 million ordinary shares of 10 pence each into 20 million limited voting convertible ordinary shares of 10 pence each.



Limited voting convertible ordinary shares



The ordinary shares and the limited voting convertible ordinary shares have the same rights,
except that the limited voting convertible ordinary shares do not confer the right to vote on resolutions to appoint, reappoint, elect or remove directors of Telewest. No application will be made for the limited voting convertible ordinary shares to
be listed or dealt in on any stock exchange. Holders of limited voting convertible ordinary shares are entitled to convert all or some of their limited voting convertible ordinary shares into fully paid ordinary shares, provided that the conversion
would not result in a change of control of the Company for the purposes of the indentures governing certain Notes and Debentures. The limited voting convertible ordinary shares are convertible into ordinary shares at the Companys option at any
time, subject to certain conditions. The sole holders of the limited voting convertible ordinary shares are Liberty Media and Microsoft.



Members of the Liberty Media Group and/or the Microsoft Group can redesignate all or any of their ordinary shares into limited voting convertible ordinary shares. This is
to ensure that, on any future purchase of ordinary shares by members of the Microsoft Group and/or members of the Liberty Media Group, they will, at that time, be able to re-designate such number of their then existing holding of ordinary shares so
as to avoid a change of control of the Company for the purposes of the Notes and Debentures.



Future purchases of ordinary shares and/or limited voting convertible ordinary shares by members of the Liberty Media Group and/or the Microsoft Group will, however, be subject to Rule 9 of the UKs City Code on
Takeovers and Mergers because both classes of shares are treated as voting shares for that purpose. Under Rule 9, when any person acquires, whether by a series of transactions over a period of time or not, shares which (taken together with shares
held or acquired by persons acting in concert with him) carry 30% or more (but less than 50%) of the voting rights of a public company, that person is normally required to make a general offer to shareholders for the entire share capital of the
company then in issue. Any person, or group of persons acting in concert, owning shares carrying 50% or more of the voting rights of a public company, subject to their own individual limits, is free to acquire further shares in that public company
without giving rise to the requirement to make a general offer for the entire issued share capital of that company.



In May 2001, Liberty Media increased its shareholding in the Company as a result of the purchase of 20 million ordinary shares of 10 pence each. Prior to the increase in
shareholding, Liberty Media redesignated 20 million ordinary shares of 10 pence each as limited voting convertible ordinary shares of 10 pence each. As a result Liberty Media and Microsofts combined shareholdings remained below 50% of the
issued ordinary share capital, above which level a change of control for the purposes of the Groups debt securities may occur.



19    SHARE-BASED COMPENSATION PLANS



At December 31, 2002, the Company operated five types of share-based compensation plans: the Executive Share Option Schemes, the Sharesave Schemes, the Telewest
Restricted Share Scheme (RSS), the Telewest Long Term Incentive Plan (LTIP) and an Equity Participation Plan (EPP).



The Company applies APB 25 and related interpretations in accounting for its share-based compensation plans. Compensation cost is recognized over the estimated service
period in respect of performance based share option grants to the extent that the market value of the Companys ordinary shares exceeds the exercise price at the earlier of the vesting date or the Balance Sheet date. Compensation cost is
recognized for awards over ordinary shares made under the RSS since the awards have no exercise price. Compensation cost is recognized over the estimated service period in respect of the LTIP to the extent that the market value of the Companys
ordinary shares exceeds the exercise price at the earlier of the vesting date or the Balance Sheet date.





F-26



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Compensation cost recognized for share option grants and awards is as follows:



|                              |  |           |   |  |           |  |          
|----------------------------- |  | --------- | - |  | --------- |  | ---------
|                              |  | 2002      |   |  | 2001      |  | 2000     
|                              |  | £ million |   |  | £ million |  | £ million
|                             
|LTIP                          |  | (1        | ) |  |          |  | 5        
|Executive Share Option Scheme |  |          |   |  | 1         |  | 2        
|EPP                           |  |          |   |  | 1         |  | 1        
|                             
|                              |  | (1        | ) |  | 2         |  | 8        
|                             



During the year, no options or awards
were granted over any ordinary shares of the Company. If compensation costs for share option grants and awards under the RSS, LTIP, Executive Option Schemes and EPP had been determined based on their fair value at the date of grant for 2001 and 2000
consistent with the method prescribed by SFAS 123, the Groups net loss and basic and diluted loss per share would have been adjusted to the pro forma amounts set out below:



|                                 |  |              |   |  |           |   |  |           |  
|-------------------------------- |  | ------------ | - |  | --------- | - |  | --------- | -
|                                 |  | 2002Restated |   |  | 2001      |   |  | 2000      |  
|                                 |  | £ million    |   |  | £ million |   |  | £ million |  
|                                 | 
|Net loss                         |  |              |   |  |           |   |  |           |  
|as reported                      |  | (2,789       | ) |  | (1,741    | ) |  | (755      | )
|pro forma                        |  | (2,766       | ) |  | (1,750    | ) |  | (757      | )
|                                 | 
|                                 |  | Pence        |   |  | Pence     |   |  | Pence     |  
|                                 | 
|Basic and diluted loss per share |  |              |   |  |           |   |  |           |  
|as reported                      |  | (97          | ) |  | (60       | ) |  | (28       | )
|pro forma                        |  | (96          | ) |  | (61       | ) |  | (28       | )
|                                 | 



The fair value of each option grant in
all plans was estimated as at the date of grant using a Black-Scholes option-pricing model. The model used a weighted-average, risk-free interest rate of 5.5% and 5.8% for grants in 2001 and 2000 respectively, and an expected volatility of 55% and
30%, respectively. The Group does not expect to pay a dividend on its ordinary shares at any time during the expected life of any outstanding option. The Group expects options to be held until maturity.



Performance-based share option compensation plans



The Group has two performance-based share option plans: the 1995 (No. 1) Executive Share
Option Scheme and the 1995 (No. 2) Executive Share Option Scheme. Under both plans, certain officers and employees are granted options to purchase ordinary shares of the Company. The exercise price of each option generally equals the market price of
the Companys ordinary shares on the date of grant. The options are exercisable between three and ten years after the date of the grant with exercise conditional on the Companys shares out-performing by price the FTSE100 Index over any
three-year period preceding exercise. The Company may grant options for up to 295 million ordinary shares.





F-27



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



A summary of the status of the Companys performance-based share option plans as of December 31, 2002, 2001, and
2000 and changes during the years ended on those dates are presented below:



|                                                               |  |                 |   |  |                                  |  |                 |   |  |                                  |  |                  |   |  |                                 
|-------------------------------------------------------------- |  | --------------- | - |  | -------------------------------- |  | --------------- | - |  | -------------------------------- |  | ---------------- | - |  | --------------------------------
|                                                               |  | Numberof shares |   |  | 2002Weightedaverageexerciseprice |  | Numberof shares |   |  | 2001Weightedaverageexerciseprice |  | Number of shares |   |  | 2000Weightedaverageexerciseprice
|                                                              
|Outstanding at beginning of year                               |  | 97,699,837      |   |  | 136.4p                           |  | 52,503,409      |   |  | 173.2p                           |  | 17,028,622       |   |  | 110.0p                          
|Adjustments during the year                                    |  |                |   |  |                                 |  |                |   |  |                                 |  | 4,457,322        |   |  | 143.8p                          
|Granted                                                        |  |                |   |  |                                 |  | 53,709,994      |   |  | 98.8p                            |  | 35,154,239       |   |  | 205.1p                          
|Exercised                                                      |  |                |   |  |                                 |  | (1,210,816      | ) |  | 78.2p                            |  | (2,501,964       | ) |  | 114.9p                          
|Forfeited                                                      |  | (7,642,594      | ) |  | 126.0p                           |  | (7,302,750      | ) |  | 134.3p                           |  | (1,634,810       | ) |  | 208.8p                          
|                                                              
|Outstanding at end of year                                     |  | 90,057,243      |   |  | 137.3p                           |  | 97,699,837      |   |  | 136.4p                           |  | 52,503,409       |   |  | 173.2p                          
|                                                              
|Options exercisable at year end                                |  | 36,358,298      |   |  | 141.4p                           |  | 16,577,655      |   |  | 132.0p                           |  | 14,938,772       |   |  | 129.8p                          
|                                                              
|Weighted average fair value of options granted during the year |  |                 |   |  |                                 |  |                 |   |  | 69.7p                            |  |                  |   |  | 33.9p                           
|                                                              



The adjustments during 2000 arose as a
result of the transfer in of former Flextech outstanding options.



Share
options are forfeited due to employees leaving the Group before their share options become exercisable.



The following table summarizes information about the Companys performance-based share option plans outstanding at December 31, 2002.



|                         |  |                                     |  |                                         |  |                              |  |                                      |  |                             
|------------------------ |  | ----------------------------------- |  | --------------------------------------- |  | ---------------------------- |  | ------------------------------------ |  | ----------------------------
|                         |  | Optionsoutstanding                  |  | Optionsexercisable                     
|Range of exercise prices |  | NumberoutstandingatDecember 31,2002 |  | Weightedaverageremainingcontractuallife |  | Weightedaverageexerciseprice |  | Numberexercisable atDecember 31,2002 |  | Weightedaverageexerciseprice
|                        
|65.7  76.8p             |  | 13,890,131                          |  | 7.4 yrs                                 |  | 74.2p                        |  | 6,307,995                            |  | 73.3p                       
|81.5  82.5p             |  | 2,025,479                           |  | 8.6 yrs                                 |  | 81.7p                        |  | 257,834                              |  | 81.7p                       
|84.6  99.9p             |  | 2,212,140                           |  | 2.5 yrs                                 |  | 89.2p                        |  | 2,212,140                            |  | 89.0p                       
|102.0  109.1p           |  | 33,133,132                          |  | 8.2 yrs                                 |  | 103.8p                       |  | 10,574,594                           |  | 103.6p                      
|114.0  125.9p           |  | 11,133,884                          |  | 7.5 yrs                                 |  | 119.2p                       |  | 3,890,521                            |  | 120.1p                      
|130.4  142.9p           |  | 982,642                             |  | 4.2 yrs                                 |  | 139.1p                       |  | 982,642                              |  | 139.1p                      
|160.0  170.0p           |  | 1,502,207                           |  | 7.3 yrs                                 |  | 166.2p                       |  | 709,386                              |  | 167.7p                      
|202.4  235.0p           |  | 23,883,741                          |  | 7.5 yrs                                 |  | 229.4p                       |  | 10,638,164                           |  | 228.5p                      
|237.3  249.4p           |  | 543,216                             |  | 7.1 yrs                                 |  | 239.7p                       |  | 268,467                              |  | 240.9p                      
|274.3  276.5p           |  | 361,832                             |  | 6.4 yrs                                 |  | 276.4p                       |  | 332,813                              |  | 276.4p                      
|289.0  294.8p           |  | 388,839                             |  | 6.8 yrs                                 |  | 291.2p                       |  | 183,742                              |  | 291.7p                      
|                        
|65.7  294.8p            |  | 90,057,243                          |  | 7.6 yrs                                 |  | 137.3p                       |  | 36,358,298                           |  | 141.4p                      
|                        



Fixed share option compensation
plans



The Company also operates the Sharesave Scheme, a fixed share
option compensation scheme. Under this plan, the Company grants options to employees to purchase ordinary shares at up to a 20% discount to market price. These options can be exercised only with funds saved by employees over time in a qualified
savings account. The options are exercisable between 37 and 66 months after commencement of the savings contracts.





F-28



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



A summary of the status of the Companys fixed share option plan as of December 31, 2002, 2001, and 2000 and the
changes during the years ended on those dates are presented below:



|                                                               |  |                 |   |  |                                  |  |                 |   |  |                                  |  |                 |   |  |                                 
|-------------------------------------------------------------- |  | --------------- | - |  | -------------------------------- |  | --------------- | - |  | -------------------------------- |  | --------------- | - |  | --------------------------------
|                                                               |  | Numberof shares |   |  | 2002Weightedaverageexerciseprice |  | Numberof shares |   |  | 2001Weightedaverageexerciseprice |  | Numberof shares |   |  | 2000Weightedaverageexerciseprice
|                                                              
|Outstanding at beginning of year                               |  | 21,519,334      |   |  | 80.5p                            |  | 26,635,135      |   |  | 91.1p                            |  | 11,679,289      |   |  | 116.9p                          
|Adjustments during the year                                    |  |                |   |  |                                 |  |                |   |  |                                 |  | 654,868         |   |  | 126.2p                          
|Granted                                                        |  |                |   |  |                                 |  | 9,205,135       |   |  | 60.3p                            |  | 17,946,934      |   |  | 88.3p                           
|Exercised                                                      |  |                |   |  |                                 |  | (4,380,809      | ) |  | 57.3p                            |  | (876,216        | ) |  | 98.1p                           
|Forfeited                                                      |  | (12,550,048     | ) |  | 82.3p                            |  | (9,940,127      | ) |  | 100.4p                           |  | (2,769,740      | ) |  | 187.6p                          
|                                                              
|Outstanding at end of year                                     |  | 8,969,286       |   |  | 78.0p                            |  | 21,519,334      |   |  | 80.5p                            |  | 26,635,135      |   |  | 91.1p                           
|                                                              
|Options exercisable at year end                                |  | 36,272          |   |  | 159.1p                           |  | 72,926          |   |  | 98.0p                            |  | 4,443,443       |   |  | 57.1p                           
|                                                              
|Weighted average fair value of options granted during the year |  |                |   |  |                                 |  |                |   |  | 33.3p                            |  |                |   |  | 39.1p                           
|                                                              



The adjustments during 2000 arose as a
result of the transfer in of former Flextech outstanding options.



Share
options are forfeited due to employees leaving the Group before their share options become exercisable.



The following table summarizes information about the Companys fixed share options outstanding at December 31, 2002:



|                         |  |                                     |  |                                        
|------------------------ |  | ----------------------------------- |  | ---------------------------------------
|                         |  | Options outstanding                
|Range of exercise prices |  | NumberoutstandingatDecember 31,2002 |  | Weightedaverageremainingcontractuallife
|                        
|58.5  88.3p             |  | 8,652,129                           |  | 2.1 yrs                                
|103.9  115.9p           |  | 40,262                              |  | 0.9 yrs                                
|128.6  161.9p           |  | 24,455                              |  | 0.5 yrs                                
|191.0  236.5p           |  | 252,440                             |  | 0.6 yrs                                
|                        
|58.5  236.5p            |  | 8,969,286                           |  | 2.0 yrs                                
|                        



Telewest Restricted Share Scheme
(RSS)



The Company operates the RSS in conjunction with an
employment trust, the Telewest 1994 Employees Share Ownership Plan Trust (the Telewest ESOP), which has been designed to provide incentives to executives of the Company. Under the RSS, executives may be granted awards over ordinary
shares of the Company based on a percentage of salary. The awards are made for no monetary consideration. The awards generally vest three years after the date of the award and are exercisable for up to seven years after the date when they vest.



The compensation charge related to each award is based on the share price of
the ordinary shares on the date the award was made.



A summary of the status of
the RSS at December 31, 2002, 2001, and 2000 and changes during the years ended on those dates are presented below:



|                                                              |  |                     |   |  |                     |   |  |                     |  
|------------------------------------------------------------- |  | ------------------- | - |  | ------------------- | - |  | ------------------- | -
|                                                              |  | 2002Numberof shares |   |  | 2001Numberof shares |   |  | 2000Numberof shares |  
|                                                              | 
|Outstanding at beginning of year                              |  | 530,855             |   |  | 358,316             |   |  | 576,333             |  
|Granted                                                       |  |                    |   |  | 248,595             |   |  |                    |  
|Exercised                                                     |  | (37,821             | ) |  | (76,056             | ) |  | (131,394            | )
|Forfeited                                                     |  |                    |   |  |                    |   |  | (86,623             | )
|                                                              | 
|Outstanding at end of year                                    |  | 493,034             |   |  | 530,855             |   |  | 358,316             |  
|                                                              | 
|Awards exercisable at year end                                |  | 214,114             |   |  | 38,338              |   |  | 86,989              |  
|                                                              | 
|Weighted average fair value of awards granted during the year |  |                    |   |  | £1.10               |   |  |                    |  
|                                                              | 



F-29



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Share awards are forfeited due to employees leaving the Group before their awards become exercisable.



At December 31, 2002, the 493,034 awards outstanding and the 214,114 awards exercisable have
weighted average remaining contractual lives of 7.4 years and 6.3 years respectively.



Deferred compensation cost relating to RSS is £38,000 (2001: £478,000).



Long Term Incentive Plan (LTIP)



The LTIP provides for share awards to executive directors and senior executives. Under the LTIP, an executive will be awarded the provisional right to receive, for no payment, a number of Telewest shares with a value equating to a
percentage of base salary. The shares will not vest unless certain performance criteria, based on total shareholder return assessed over a three-year period are met. The percentage of salary will be determined by the Remuneration Committee and will
be up to 100% of base salary for executive directors.



A summary of the status
of the LTIP at December 31, 2002, 2001, and 2000 and changes during the years ended on those dates are presented below:



|                                                              |  |                     |   |  |                     |   |  |                     |  
|------------------------------------------------------------- |  | ------------------- | - |  | ------------------- | - |  | ------------------- | -
|                                                              |  | 2002Numberof shares |   |  | 2001Numberof shares |   |  | 2000Numberof shares |  
|                                                              | 
|Outstanding at beginning of year                              |  | 1,566,507           |   |  | 2,714,552           |   |  | 4,005,075           |  
|Granted                                                       |  |                    |   |  | 910,730             |   |  | 816,175             |  
|Exercised                                                     |  | (29,502             | ) |  | (1,220,362          | ) |  | (1,152,826          | )
|Forfeited                                                     |  | (1,113,733          | ) |  | (838,413            | ) |  | (953,872            | )
|                                                              | 
|Outstanding at end of year                                    |  | 423,272             |   |  | 1,566,507           |   |  | 2,714,552           |  
|                                                              | 
|Awards exercisable at year end                                |  | 108,569             |   |  | 265,939             |   |  | 1,058,542           |  
|                                                              | 
|Weighted average fair value of awards granted during the year |  |                    |   |  | £1.09               |   |  | £0.24               |  
|                                                              | 



Share awards are forfeited due to
employees leaving the Group before their share options become exercisable or due to performance criteria not being met.



Deferred compensation cost relating to the LTIP is £nil (2001: £189,000).



Equity Participation Plan (EPP)



The Remuneration Committee has provided that, under the EPP, an employee with two years service or at manager level or above, can use up to 100% of the Short Term
Incentive Plan (STIP) bonus payable to the employee to acquire Telewest shares (bonus shares). The employee must deposit the bonus shares with the Trustee of the existing Telewest ESOP. In return, the employee is
provisionally allocated for no payment a matching number of Telewest shares. Provided the bonus shares are retained for three years and the employee remains employed for three years, the bonus and matching shares would thereafter be released to the
employee.



A summary of the status of the Companys EPP at December 31,
2002, 2001, and 2000 and the changes during the years ended on those dates are presented below:



|                                                              |  |                     |   |  |                     |   |  |                     |  
|------------------------------------------------------------- |  | ------------------- | - |  | ------------------- | - |  | ------------------- | -
|                                                              |  | 2002Numberof shares |   |  | 2001Numberof shares |   |  | 2000Numberof shares |  
|                                                              | 
|Outstanding at beginning of year                              |  | 572,053             |   |  | 1,193,839           |   |  | 1,074,150           |  
|Granted                                                       |  |                    |   |  |                    |   |  | 267,524             |  
|Exercised                                                     |  | (256,790            | ) |  | (579,430            | ) |  | (130,576            | )
|Forfeited                                                     |  | (9,693              | ) |  | (42,356             | ) |  | (17,259             | )
|                                                              | 
|Outstanding at end of year                                    |  | 305,570             |   |  | 572,053             |   |  | 1,193,839           |  
|                                                              | 
|Awards exercisable at year end                                |  | 123,168             |   |  | 26,443              |   |  | 288,253             |  
|                                                              | 
|Weighted average fair value of awards granted during the year |  |                    |   |  |                    |   |  | £2.49               |  
|                                                              | 



F-30



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Share awards are forfeited due to employees leaving the Group before their share options become exercisable.



Deferred compensation cost relating to the EPP is £80,000 (2001:
£419,000).



20    ACCUMULATED OTHER COMPREHENSIVE
INCOME



|                                                         |  |                                                                  |   |  |                                                                 |  
|-------------------------------------------------------- |  | ---------------------------------------------------------------- | - |  | --------------------------------------------------------------- | -
|                                                         |  | 2002Gains/(losses) on mark tomarket ofcash flow hedges £ million |   |  | 2001Gains/(losses) on mark tomarket ofcash flowhedges £ million |  
|                                                         | 
|Balance at January 1                                     |  | 37                                                               |   |  |                                                                |  
|Cumulative effect of accounting change                   |  |                                                                 |   |  | (16                                                             | )
|Amounts reclassified into earnings                       |  | (48                                                              | ) |  | (5                                                              | )
|Current period increase in fair value                    |  |                                                                 |   |  | 57                                                              |  
|Unrealised gain on deemed partial disposal of investment |  |                                                                 |   |  | 1                                                               |  
|                                                         | 
|Balance at December 31                                   |  | (11                                                              | ) |  | 37                                                              |  
|                                                         | 



The amounts reclassified into earnings
are detailed in note 5.



21    COMMITMENTS AND
CONTINGENCIES



Restricted cash



At December 31, 2002, the Group has cash restricted as to use of £12 million which
provides security for leasing obligations.



Other commitments



The amount of capital expenditure authorized by the Group for which no
provision has been made in the consolidated financial statements is as follows:



|           |  |           |  |          
|---------- |  | --------- |  | ---------
|           |  | 2002      |  | 2001     
|           |  | £ million |  | £ million
|          
|Contracted |  | 13        |  | 28       
|          



In addition the Group has contracted
to buy £28 million of programming rights for which the license period has not yet started.



Capital and operating leases



The Group
leases a number of assets under arrangements accounted for as capital leases, as follows:



|                       |  |                  |  |                         |   |  |              
|---------------------- |  | ---------------- |  | ----------------------- | - |  | -------------
|                       |  | Acquisitioncosts |  | Accumulateddepreciation |   |  | Net bookvalue
|                       |  | £ million        |  | £ million               |   |  | £ million    
|                      
|At December 31, 2002 : |  |                  |  |                         |   |  |              
|Electronic equipment   |  | 283              |  | (185                    | ) |  | 98           
|Other equipment        |  | 118              |  | (58                     | ) |  | 60           
|At December 31, 2001 : |  |                  |  |                         |   |  |              
|Electronic equipment   |  | 290              |  | (187                    | ) |  | 103          
|Other equipment        |  | 109              |  | (43                     | ) |  | 66           
|                      



Depreciation charged on these assets
was £44 million and £45 million for the years ended December 31, 2002 and 2001 respectively.



The Group leases business offices and uses certain equipment under lease arrangements accounted for as operating leases. Minimum rental expense under such arrangements amounted to £21 million, £19 million
and £17 million for the years ended December 31, 2002, 2001 and 2000, respectively and is included in depreciation expense detailed in note 11.





F-31



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



Future minimum lease payments under capital and operating leases are summarized as follows as of

December 31, 2002:

|                    |  |                |   |  |                 
|------------------- |  | -------------- | - |  | ----------------
|                    |  | Capital leases |   |  | Operating leases
|                    |  | £ million      |   |  | £ million       
|                   
|2003                |  | 89             |   |  | 25              
|2004                |  | 46             |   |  | 18              
|2005                |  | 38             |   |  | 14              
|2006                |  | 29             |   |  | 13              
|2007                |  | 19             |   |  | 12              
|2008 and thereafter |  | 13             |   |  | 91              
|                   
|                    |  | 234            |   |  |                 
|Imputed interest    |  | (30            | ) |  |                 
|                   
|                    |  | 204            |   |  |                 
|                   



It is expected that, in the normal
course of business, expiring leases will be renewed or replaced.



The Group
leases capacity on its network to other telecommunications companies. These leases are accounted for as operating leases and revenues received are recognized over the life of the leases as follows:



|                    |  |          
|------------------- |  | ---------
|                    |  | £ million
|                   
|2003                |  | 5        
|2004                |  | 5        
|2005                |  | 3        
|2006                |  | 1        
|2007                |  | 1        
|2008 and thereafter |  | 5        
|                   



The assets held under these leases are
accounted for as follows:



|                     |  |                  |  |                         |   |  |              
|-------------------- |  | ---------------- |  | ----------------------- | - |  | -------------
|                     |  | Acquisitioncosts |  | Accumulateddepreciation |   |  | Netbook value
|                     |  | £ million        |  | £ million               |   |  | £ million    
|                    
|At December 31, 2002 |  |                  |  |                         |   |  |              
|Cable and ducting    |  | 45               |  | (5                      | ) |  | 40           
|At December 31, 2001 |  |                  |  |                         |   |  |              
|Cable and ducting    |  | 45               |  | (3                      | ) |  | 42           
|                    



Depreciation charged on these assets
was £2 million and £2 million for the years ended December 31, 2002 and 2001 respectively.



Contingent liabilities



The Group has
provided performance bonds in respect of its national license and to local authorities up to a maximum amount of £6 million (2001: £7 million).



The Group is a party to various other legal proceedings in the ordinary course of business which it does not believe will result, in aggregate, in a material adverse
effect on its financial condition or results of operations.





F-32



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



22    RELATED-PARTY TRANSACTIONS



Identity of relevant related parties



Liberty Media, Inc (Liberty) and Microsoft are related parties of the Group, in
that they control or controlled, directly or indirectly, more than 20% of the voting rights of the Company in 2002, 2001 and 2000.



Flextech up to its acquisition on April 19, 2000 was a related party of the Group as Liberty owned more than 20% of the voting rights of Flextech.



UKTV is a related party of the Group, as the Group owns 50% of the voting rights.



TV Travel Group Limited (TVT) was a related party of the Group, as the Group
owned 37.95% of the voting rights before disposal in 2002.



In 2001 Sit-Up
Limited (Sit-Up ) became a related party when the Group sold its shareholding in Screenshop to Sit-Up in return for a 36.36% shareholding.



Nature of transactions



The Group had a £10 million loan facility with Liberty. Interest charged on this loan was £nil in 2001 and £1 million in 2000. The balance due to Liberty at December 31, 2000 was £17
million including accrued interest and was repaid in 2001.



The Group purchases
software and consultancy services from Microsoft, on normal commercial terms. Purchases in the year ended December 31, 2002 amounted to £1 million (2001: £2 million, 2000: £2 million). The balance outstanding in respect of these
purchases was £nil at December 31, 2002, 2001 and 2000.



The Group has
billed overheads and costs incurred on their behalf to UKTV, TVT and Sit-Up of £11 million, £1 million and £1 million (2001: £8 million, £3 million and £1 million, 2000: £7 million, £10 million and
£nil) respectively. The Group has also made a loan to UKTV. Interest charged on this loan was £12 million (2001: £12 million, 2000: £15 million). Amounts due from UKTV, TVT and Sit-Up at December 31, 2002 were £208
million, £1 million and £4 million respectively (2001: £218 million, £28 million and £nil and 2000: £229 million, £31 million and £nil respectively).



In the normal course of its business the Group purchases programming from UKTV on normal
commercial terms. Purchases in the year ended December 31, 2002 were £13 million (2001: £9 million, 2000: £7 million). The balance due to UKTV at December 31, 2002 was £nil (2001: £2 million, 2000: £nil).



23    SUBSEQUENT EVENTS AND FINANCIAL RESTRUCTURING



The Group is renegotiating its bank facilities and debt financing
arrangements. Further details of the proposed Financial Restructuring are as follows:



On September 30, 2002, we announced that we had reached a preliminary agreement relating to a financial restructuring (the Financial Restructuring) with an ad hoc committee of our bondholders (the Bondholder
Committee). That agreement provides for the cancellation of all outstanding notes and debentures (the Notes), representing approximately £3.4 billion of indebtedness, issued by the Company and Telewest Finance (Jersey)
Limited and certain other unsecured foreign exchange hedge contracts (the Hedge Contracts) of the Company in exchange for New Ordinary Shares (New Shares) representing 97% of the issued share capital of the Company
immediately after the Financial Restructuring. The Companys current ordinary shareholders will receive the remaining 3% of the Companys issued ordinary share capital.





F-33



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



We also announced on September 30, 2002 that we were deferring payment of interest under certain of our Notes and the
settlement of the Hedge Contracts. Such non-payment continues and has resulted in defaults under the Groups bank facilities and its bonds. Based on one such default, in respect of non-payment of approximately £10.5 million to a Hedge
Contract counter-party, that counter-party has filed a petition for the winding-up of the Company with a UK court. The Company intends to deal with this claim as part of the overall restructuring of its unsecured debt obligations and does not
believe that the legal action will delay or significantly impede the Financial Restructuring process. The Company will of course continue to meet its obligations to its suppliers and trade creditors and this legal action is expected to have no
impact on customer service.



On January 15, 2003, we announced that we had
reached a non-binding agreement with respect to the terms of amended and restated credit facilities with both the steering committee of our senior lenders and the Bondholder Committee. In addition, the terms of these facilities have received credit
committee approval, subject to documentation and certain other issues, from all of our senior lenders, save for those banks which are also creditors by virtue of the unsecured Hedge Contracts with which we will deal in the overall Financial
Restructuring.



The terms of the amended and restated bank facilities are as
follows:



|· | the amended facilities total £2,155 million, comprising term loans of £1,840 million, £190 million of committed overdraft and revolving credit facilities and an
uncommitted term facility of £125 million;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· | the amended facilities do not amortise; and the majority of the facilities will mature on December 31, 2005 with the balance maturing on June 30, 2006;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------



|· | financial covenants will be re-set to reflect the Companys new business plan; and
|- | ----------------------------------------------------------------------------------



|· | the pricing on the facilities will be increased to reflect market sentiment.
|- | ----------------------------------------------------------------------------



These amended facilities will replace the Groups existing bank facilities (the Senior Secured Facility) and are, as noted above, conditional on
various matters, including the satisfactory finalisation of arrangements for dealing with foreign exchange creditors and the completion of our balance sheet restructuring. These amended credit facilities will provide the Company with substantial
liquidity, which is expected to be sufficient to see the Company through to cash flow positive after completion of the Financial Restructuring.



Negotiations are continuing with the Bondholder Committee, the Companys senior lenders and certain other major stakeholders with a view to the timely completion of
the Financial Restructuring.



These financial statements have been prepared on
a going concern basis and do not include any adjustments that would arise as a result of the going concern basis of preparation being inappropriate. The board of directors have confidence in the successful conclusion of a restructuring of the
Companys balance sheet (and any required amendments to the Senior Secured Facility) and, together with and on the basis of cash flow information that they have prepared, the directors consider that the Group will continue to operate as a going
concern for a period of at least 12 months from the date of issue of these financial statements. Any restructuring will require the approval of our bankers and various stakeholders. Inherently, there can be no certainty in relation to any of these
matters.





F-34



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



24    QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

|                                                                                      |  |               |   |  |                        |   |  |              |   |  |               |   |  |              |  
|------------------------------------------------------------------------------------- |  | ------------- | - |  | ---------------------- | - |  | ------------ | - |  | ------------- | - |  | ------------ | -
|                                                                                      |  | 2002          |  
|                                                                                      |  | TotalRestated |   |  | Fourthquarter*Restated |   |  | Thirdquarter |   |  | Secondquarter |   |  | Firstquarter |  
|                                                                                      |  | £ million     |   |  | £ million              |   |  | £ million    |   |  | £ million     |   |  | £ million    |  
|                                                                                      | 
|Revenue                                                                               |  | 1,283         |   |  | 307                    |   |  | 323          |   |  | 334           |   |  | 319          |  
|Gross profit (after £841 million fixed asset impairment charge in the fourth quarter) |  | (469          | ) |  | (764                   | ) |  | 97           |   |  | 100           |   |  | 98           |  
|Operating loss                                                                        |  | (2,440        | ) |  | (2,349                 | ) |  | (31          | ) |  | (29           | ) |  | (31          | )
|Finance expenses, net                                                                 |  | (296          | ) |  | (65                    | ) |  | (70          | ) |  | (61           | ) |  | (100         | )
|Net loss                                                                              |  | (2,789        | ) |  | (2,471                 | ) |  | (134         | ) |  | (59           | ) |  | (125         | )
|Basic and diluted loss per ordinary share                                             |  | (97p          | ) |  | (86p                   | ) |  | (5p          | ) |  | (2p           | ) |  | (4p          | )
|                                                                                      | 



|* | In the fourth quarter the Group recorded a goodwill impairment charge of £1,445 million, wrote down the value of its investments in affiliates by £130 million
and recorded a fixed asset impairment charge of £841 million.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                          |  |           |   |  |                 |   |  |               |   |  |                |   |  |               |  
|----------------------------------------- |  | --------- | - |  | --------------- | - |  | ------------- | - |  | -------------- | - |  | ------------- | -
|                                          |  | 2001      |  
|                                          |  | Total     |   |  | Fourth quarter* |   |  | Third quarter |   |  | Second quarter |   |  | First quarter |  
|                                          |  | £ million |   |  | £ million       |   |  | £ million     |   |  | £ million      |   |  | £ million     |  
|                                          | 
|Revenue                                   |  | 1,254     |   |  | 329             |   |  | 312           |   |  | 315            |   |  | 298           |  
|Gross profit                              |  | 325       |   |  | 91              |   |  | 85            |   |  | 83             |   |  | 66            |  
|Operating loss                            |  | (1,121    | ) |  | (844            | ) |  | (83           | ) |  | (87            | ) |  | (107          | )
|Finance expenses, net                     |  | (472      | ) |  | (131            | ) |  | (104          | ) |  | (95            | ) |  | (142          | )
|Net loss                                  |  | (1,741    | ) |  | (1,122          | ) |  | (192          | ) |  | (185           | ) |  | (242          | )
|Basic and diluted loss per ordinary share |  | (60p      | ) |  | (38p            | ) |  | (7p           | ) |  | (6p            | ) |  | (9p           | )
|                                          | 



|* | In the fourth quarter the Group recorded a goodwill impairment charge of £766 million and wrote down the value of its investments in affiliates by £202
million.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



Finance expenses include foreign exchange
gains and losses on the retranslation or valuation of US Dollar-denominated financial instruments using period end exchange rates and market valuations.



25    SEGMENTAL INFORMATION



The Group
applies SFAS 131, Disclosures about Segments of an Enterprise and Related Information. SFAS 131 establishes standards for reporting information about operating segments in annual financial statements. It also establishes standards for related
disclosures about products and services, and geographic areas. Operating segments are defined as a component of an enterprise that (a) engages in business activities from which it may earn revenues and incur expenses, (b) whose operating results are
regularly reviewed by the enterprises chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (c) for which discrete financial information is available. The Groups
chief operating decision-maker is its Acting Chief Executive Officer. The Group operates two operating segments; Cable and Content. The chief operating decision-maker receives disaggregated financial and subscriber data for the Cable segment,
covering; telephony, television and internet product lines, while support, service and network costs are compiled at the operating segment level. The internet product lines comprise internet sales and until November 2002, when the sales ceased,
sales of cable publications. The Content operating segment supplies TV programming to the UK pay-TV broadcasting market and its operating results, which are naturally separate from the Cable operating segment, are regularly reviewed by the chief
operating decision-maker.



The accounting policies of the operating segments
are the same as those described in the summary of significant accounting policies. In 2001, the Group changed the structure of its segmental analysis, and certain corresponding information from the previous years has been restated to reflect the
change in structure.





F-35



---

Notes to Consolidated Financial Statements

years ended December 31, 2002, 2001 and 2000

---



The following tables present summarized financial information relating to the reportable segments for each of the
three years ended December 31, 2002:



|                                               |  |                               |   |  |                        |   |  |                |   |  |                |  
|---------------------------------------------- |  | ----------------------------- | - |  | ---------------------- | - |  | -------------- | - |  | -------------- | -
|                                               |  | Note 2 2002Restated $ million |   |  | 2002Restated £ million |   |  | 2001 £ million |   |  | 2000 £ million |  
|                                               | 
|CABLE SEGMENT                                  |  |                               |   |  |                        |   |  |                |   |  |                |  
|Cable television                               |  | 541                           |   |  | 336                    |   |  | 329            |   |  | 279            |  
|Consumer telephony                             |  | 797                           |   |  | 495                    |   |  | 488            |   |  | 445            |  
|Internet and other                             |  | 101                           |   |  | 63                     |   |  | 40             |   |  | 16             |  
|                                               | 
|Total Consumer Sales Division                  |  | 1,439                         |   |  | 894                    |   |  | 857            |   |  | 740            |  
|Business Sales Division                        |  | 455                           |   |  | 283                    |   |  | 268            |   |  | 248            |  
|                                               | 
|Third party revenue                            |  | 1,894                         |   |  | 1,177                  |   |  | 1,125          |   |  | 988            |  
|Operating costs and expenses                   |  | (1,333                        | ) |  | (828                   | ) |  | (822           | ) |  | (757           | )
|Depreciation3                                  |  | (2,134                        | ) |  | (1,326                 | ) |  | (453           | ) |  | (392           | )
|Amortization of goodwill2                      |  | (1,635                        | ) |  | (1,016                 | ) |  | (82            | ) |  | (86            | )
|                                               | 
|Operating loss                                 |  | (3,208                        | ) |  | (1,993                 | ) |  | (232           | ) |  | (247           | )
|                                               | 
|Share of net loss of affiliates                |  |                              |   |  |                       |   |  | (5             | ) |  | (6             | )
|Additions to property and equipment            |  | 737                           |   |  | 458                    |   |  | 649            |   |  | 587            |  
|Investment in affiliates                       |  | 5                             |   |  | 3                      |   |  | 2              |   |  | 3              |  
|Goodwill                                       |  | 492                           |   |  | 306                    |   |  | 1,322          |   |  | 1,394          |  
|Total assets                                   |  | 5,833                         |   |  | 3,624                  |   |  | 5,093          |   |  | 5,146          |  
|                                               | 
|                                               |  |                               |   |  |                        |   |  |                |   |  |                |  
|                                               | 
|CONTENT SEGMENT                                |  |                               |   |  |                        |   |  |                |   |  |                |  
|                                               | 
|Content Segment                                |  | 195                           |   |  | 121                    |   |  | 143            |   |  | 88             |  
|Inter-segmental1                               |  | (24                           | ) |  | (15                    | ) |  | (14            | ) |  | (7             | )
|                                               | 
|Third party revenue                            |  | 171                           |   |  | 106                    |   |  | 129            |   |  | 81             |  
|Operating costs and expenses                   |  | (183                          | ) |  | (114                   | ) |  | (135           | ) |  | (101           | )
|Depreciation3                                  |  | (16                           | ) |  | (10                    | ) |  | (16            | ) |  | (31            | )
|Amortization of goodwill2                      |  | (691                          | ) |  | (429                   | ) |  | (867           | ) |  | (61            | )
|                                               | 
|Operating loss                                 |  | (719                          | ) |  | (447                   | ) |  | (889           | ) |  | (112           | )
|                                               | 
|Share of net loss of affiliates and impairment |  | (190                          | ) |  | (118                   | ) |  | (211           | ) |  | (9             | )
|Additions to property and equipment            |  | 5                             |   |  | 3                      |   |  | 4              |   |  | 8              |  
|Investment in affiliates                       |  | 600                           |   |  | 373                    |   |  | 545            |   |  | 781            |  
|Goodwill                                       |  | 227                           |   |  | 141                    |   |  | 570            |   |  | 1,409          |  
|Total assets                                   |  | 758                           |   |  | 471                    |   |  | 1,239          |   |  | 2,178          |  
|                                               | 
|                                               |  |                               |   |  |                        |   |  |                |   |  |                |  
|                                               | 
|TOTAL                                          |  |                               |   |  |                        |   |  |                |   |  |                |  
|                                               | 
|Cable television                               |  | 541                           |   |  | 336                    |   |  | 329            |   |  | 279            |  
|Consumer telephony                             |  | 797                           |   |  | 495                    |   |  | 488            |   |  | 445            |  
|Internet and other                             |  | 101                           |   |  | 63                     |   |  | 40             |   |  | 16             |  
|                                               | 
|Total Consumer Sales Division                  |  | 1,439                         |   |  | 894                    |   |  | 857            |   |  | 740            |  
|Business Sales Division                        |  | 455                           |   |  | 283                    |   |  | 268            |   |  | 248            |  
|                                               | 
|Total Cable Segment                            |  | 1,894                         |   |  | 1,177                  |   |  | 1,125          |   |  | 988            |  
|Content Segment                                |  | 195                           |   |  | 121                    |   |  | 143            |   |  | 88             |  
|Inter-segmental1                               |  | (24                           | ) |  | (15                    | ) |  | (14            | ) |  | (7             | )
|                                               | 
|Total revenue                                  |  | 2,065                         |   |  | 1,283                  |   |  | 1,254          |   |  | 1,069          |  
|Operating costs and expenses                   |  | (1,516                        | ) |  | (942                   | ) |  | (957           | ) |  | (858           | )
|Depreciation3                                  |  | (2,150                        | ) |  | (1,336                 | ) |  | (469           | ) |  | (423           | )
|Amortization of goodwill2                      |  | (2,326                        | ) |  | (1,445                 | ) |  | (949           | ) |  | (147           | )
|                                               | 
|Operating loss                                 |  | (3,927                        | ) |  | (2,440                 | ) |  | (1,121         | ) |  | (359           | )
|Other expense2                                 |  | (607                          | ) |  | (377                   | ) |  | (690           | ) |  | (402           | )
|Income tax benefit                             |  | 45                            |   |  | 28                     |   |  | 70             |   |  | 6              |  
|                                               | 
|Net loss                                       |  | (4,489                        | ) |  | (2,789                 | ) |  | (1,741         | ) |  | (755           | )
|                                               | 
|Share of net loss of affiliates and impairment |  | (190                          | ) |  | (118                   | ) |  | (216           | ) |  | (15            | )
|Additions to property and equipment            |  | 742                           |   |  | 461                    |   |  | 653            |   |  | 595            |  
|Investment in affiliates                       |  | 605                           |   |  | 376                    |   |  | 547            |   |  | 784            |  
|Goodwill                                       |  | 719                           |   |  | 447                    |   |  | 1,892          |   |  | 2,803          |  
|Total assets                                   |  | 6,591                         |   |  | 4,095                  |   |  | 6,332          |   |  | 7,324          |  
|                                               | 

|1 | Inter-segmental revenues are revenues from sales in our Content Segment which are costs in our Cable Segment and are eliminated on consolidation.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------

|2 | In the fourth quarter of 2002, the Group recorded a goodwill impairment charge of £1,445 million and wrote down the value of its investments in affiliates by £130
million. In the fourth quarter of 2001, the Group recorded a goodwill impairment charge of £766 million and wrote down the value of its investments in affiliates by £202 million.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | In the fourth quarter of 2002 the Group recorded a fixed asset impairment charge of £841 million.
|- | -------------------------------------------------------------------------------------------------



F-36



---

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Index
|1.1           |  | Memorandum of Association of the Company. (Incorporated by reference to the Companys Registration Statement on Form 8-B, filed with the Securities and Exchange Commission on September
22, 1995, as amended.)                                                                                                                                                                                                      
|1.2           |  | Amended and Restated Articles of Association of the Company. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange
Commission on March 6, 2000 (Registration No. 333-11602).)                                                                                                                                                                     
|2.1           |  | Senior Debenture Indenture, dated as of October 3, 1995, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Companys 1995 Annual Report on Form
10-K filed with the Securities and Exchange Commission on April 1, 1996.)                                                                                                                                                  
|2.2           |  | Senior Discount Debenture Indenture, dated as of October 3, 1995, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Companys 1995 Annual Report
on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996.)                                                                                                                                         
|2.3           |  | Form of Senior Debenture (included in Exhibit 2.1).                                                                                                                                                                                                                                                                                                                                                                  
|2.4           |  | Form of Senior Discount Debenture (included in Exhibit 2.2).                                                                                                                                                                                                                                                                                                                                                         
|2.5           |  | Deposit Agreement, dated as of October 3, 1995, between the Company and The Bank of New York, as Book-Entry Depositary. (Incorporated by reference to the Companys 1995 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 1, 1996.)                                                                                                                                             
|2.6           |  | Indenture, dated as of November 9, 1998, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed
with the Securities and Exchange Commission on April 8, 1999 (Registration No. 333-09792).)                                                                                                                               
|2.7           |  | Form of Senior Note (included in Exhibit 2.6).                                                                                                                                                                                                                                                                                                                                                                       
|2.8           |  | Deposit Agreement between the Company and The Bank of New York, as Book-Entry Depositary, dated as of November 9, 1998. (Incorporated by reference to the Companys Registration Statement
on Form F-4 as filed with the Securities and Exchange Commission on April 8, 1999 (Registration No. 333-09792).)                                                                                                          
|2.9           |  | Registration Rights Agreement, dated November 9, 1998, among the Company, Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated and TD Securities
(USA) Inc. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange Commission on April 8, 1999 (Registration No. 333-09792).)                                    
|2.10          |  | Indenture, dated as of February 19, 1999, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Companys Registration Statement on Form F-4 as
filed with the Securities and Exchange Commission on April 8, 1999 (Registration No. 333-09792).)                                                                                                                              
|2.11          |  | Form of Senior Convertible Note (included in Exhibit 2.10).                                                                                                                                                                                                                                                                                                                                                          
|2.12          |  | Deposit and Custody Agreement among the Company, Citibank (Channel Islands) Limited, as Book-Entry Depositary, Citibank, N.A., Brussels Branch, as Note Custodian, and The Bank of New York, as
Trustee, dated February 19, 1999. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange Commission on April 8, 1999 (Registration No. 333-09792).)
|2.13          |  | Indenture, dated as of April 15, 1999, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Companys Registration Statement on Form F-3 as filed
with the Securities and Exchange Commission on October 4, 1999 (Registration No. 333-10964).)                                                                                                                               
|2.14          |  | Form of Senior Discount Note (included in Exhibit 2.13).                                                                                                                                                                                                                                                                                                                                                             
|2.15          |  | Dollar Deposit Agreement between the Company and The Bank of New York, as Book-Entry Depositary, dated as of April 15, 1999. (Incorporated by reference to the Companys Registration
Statement on Form F-4 as filed with the Securities and Exchange Commission on March 13, 2000 (Registration No. 333-11630).)                                                                                                    
|2.16          |  | Sterling Deposit Agreement among the Company, The Bank of New York Trust Company (Cayman) Ltd., as Book-Entry Depositary, and The Bank of New York, as Note Custodian, dated as of April 15,
1999. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange Commission on March 13, 2000 (Registration No. 333-11630).)                              
|2.17          |  | Registration Rights Agreement, dated April 15, 1999, among the Company, Donaldson, Lufkin & Jenrette International, CIBC Wood Gundy plc, Chase Manhattan International Limited and Salomon
Brothers International Limited. (Incorporated by reference to the Companys Registration Statement                                                                                                                        





---

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | on Form F-4 as filed with the Securities and Exchange Commission on March 13, 2000 (Registration No. 333-11630).)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2.18 |  | Loan Agreement by and among Telewest Communications Networks Limited and certain of the Companys subsidiaries and associated partnerships, as borrower, The Bank of New York, CIBC World
Markets plc, Chase Manhattan plc and Toronto-Dominion Bank Europe, Limited, as lead arrangers, the banks and financial institutions listed therein and CIBC Markets World Markets plc as agent and security trustee, dated as of May 17, 1999.
(Incorporated by reference to the Companys Registration Statement on Form F-3 as filed with the Securities and Exchange Commission on October 4, 1999 (Registration No. 333-10964).)
|2.19 |  | Indenture, dated January 25, 2000, between the Company and The Bank of New York, as Trustee. (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2.20 |  | Form of Senior Discount Note (included in Exhibit 2.19).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.21 |  | Form of Senior Note (included in Exhibit 2.19).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2.22 |  | Dollar Deposit Agreement, dated as of January 25, 2000, among the Company, The Bank of New York, as book-entry depositary, The Bank of New York, as trustee, and the holders and beneficial
owners of certificateless depositary interests. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange Commission on September 1, 2000 (Registration No.
333-12462).)                                                                                                                                                                                           
|2.23 |  | Sterling Deposit Agreement, dated as of January 25, 2000, among the Company, The Bank of New York Trust Company (Cayman) Limited, as book-entry depositary, The Bank of New York, as note
custodian, The Bank of New York, as Trustee, and the holders and beneficial owners of certificated depositary interests. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange
Commission on September 1, 2000 (Registration No. 333-12462).)                                                                                                                    
|2.24 |  | Registration Rights Agreement, dated January 25, 2000, among the Company, Donaldson, Lufkin & Jenrette International, Bank of America International Limited, Deutsche Bank AG London and
Salomon Brothers International Limited. ( Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange Commission on September 1, 2000 (Registration No. 333-12462).)                                                                                                                                                                                                     
|2.25 |  | Indenture, dated July 7, 2000, among the Company, Telewest Finance (Jersey) Limited and The Bank of New York, as Trustee. (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2.26 |  | Form of Senior Convertible Note (included in Exhibit 2.25).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|2.27 |  | Loan Agreement, dated March 16, 2001, for Credit Facilities of £2,000,000,000 together with an Institutional Facility of up to £250,000,000, among Telewest Communications Networks
Limited and the parties named therein. (Incorporated by reference to the Companys Current Report on Form 6-K filed with the Securities and Exchange Commission on May 24, 2002.)                                                                                                                                                                                                                                                         
|     |  | Note: No long-term debt instrument issued by the Company (other than as set forth above) exceeds 10% of the consolidated total assets of the Company and its
subsidiaries. In accordance with paragraph (b)4(iii) of Item 601 of Regulation S-K, the Company will furnish to the SEC upon request copies of long-term instruments and related agreements.                                                                                                                                                                                                                                                                     
|2.28 |  | Letter Amendment, dated January 2, 2002, from CIBC World Markets to Telewest Communications Networks Limited amending the Loan Agreement referred to in Exhibit 2.27. (Incorporated by
reference to the Companys Current Report on Form 6-K filed with the Securities and Exchange Commission on May 24, 2002.)                                                                                                                                                                                                                                                                                                              
|2.29 |  | 5.00% Accreting Convertible Note due 2003 in the initial principal amount of £220,000,000 issued on November 1, 2000 to Deutsche Telekom AG. (Incorporated by reference to
Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities and Exchange Commission on July 1, 2002.)                                                                                                                                                                                                                                                                                                   
|2.30 |  | 5.00% Accreting Convertible Note due 2003 in the initial principal amount of £30,000,000 issued on January 15, 2001 to Deutsche Telekom AG. (Incorporated by reference to Telewests
Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities and Exchange Commission on July 1, 2002.)                                                                                                                                                                                                                                                                                                    
|2.31 |  | 5.00% Accreting Convertible Note due 2003 in the initial principal amount of £3,500,000 issued on April 2, 2001 to Deutsche Telekom AG. (Incorporated by reference to Telewests
Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities and Exchange Commission on July 1, 2002.)                                                                                                                                                                                                                                                                                                        





---

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1  |  | Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest, certain subsidiaries of TCI, and certain subsidiaries of MediaOne as superseded by Exhibit 10.55.
(Incorporated by reference to Old Telewests 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995.)                                                            
|4.2  |  | Registration Rights Agreement, dated October 3, 1995, among the Company, the TINTA Affiliate, the MediaOne Affiliates, the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to
the Companys 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996.)                                                                                 
|4.3  |  | Tax Deed, dated November 22, 1994, between TCI International Holdings, Inc., U S WEST Holdings and Old Telewest. (Incorporated by reference to Old Telewests 1994 Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 31, 1995.)                                                                                                                               
|4.4  |  | Trademark License Agreement, effective as of November 22, 1994, between Old Telewest and U S WEST. (Incorporated by reference to Old Telewests 1994 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1995.)                                                                                                                                             
|4.5  |  | Tradename Agreement, effective as of November 22, 1994, between Old Telewest, TCI and TCI/U S WEST Cable Communications Group (TUCCI). (Incorporated by reference to Old
Telewests 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995.)                                                                                                       
|4.6  |  | Tax Deed, dated October 3, 1995, among the Company, the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to the Companys 1995 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996.)                                                                                                                                                    
|4.7  |  | Agreement, dated December 4, 1987, between United Cable Television Corporation on behalf of itself and United Artists Communications, Inc. and Trans-Global (UK) Limited. (Incorporated by
reference to Old Telewests Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398).)                           
|4.8  |  | Agreement to License and Provide Consulting Services, effective as of November 22, 1994, between Old Telewest and TCI. (Incorporated by reference to Old Telewests 1994 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 31, 1995.)                                                                                                                         
|4.9  |  | Form of BT Interconnect Agreement, a copy of which was executed by BT and various of the Companys affiliated entities. (Incorporated by reference to the Companys 1997 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1997.)                                                                                                                         
|4.10 |  | Interconnection Agreement, dated July 15, 1994, between Mercury Communications Limited (Mercury) and United Artists Communications (Scotland) Limited. (Incorporated by reference
to Old Telewests Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398).) (2)                                        
|4.11 |  | Mercury Marketing and Operations Agreement, dated August 10, 1993, between Telewest CGL and Mercury. (Incorporated by reference to Old Telewests Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398).) (2)                                                                                            
|4.12 |  | Letter Agreement, dated August 23, 1995, between SBCC and Mercury. (Incorporated by reference to the Companys Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on September 22, 1995, as amended.) (3)                                                                                                                                                       
|4.13 |  | General Purchasing Agreement, dated March 1, 1993, among Telewest CGL, various entities related to Telewest CGL, and Northern Telecom Europe Limited (the General Purchasing
Agreement). (Incorporated by reference to Amendment No. 1 to the Companys Annual Report on Form 10-K for the year ended December 31, 1997 filed with the Securities and Exchange Commission on June 19, 1998.) (2)
|4.14 |  | Purchase Agreement, dated August 27, 1993, between Southwestern Bell International Holdings and GPT Limited. (Incorporated by reference to the Companys Registration Statement on Form
8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended.)                                                                                                                 
|4.15 |  | The Old Telewest Restricted Share Scheme. (Incorporated by reference to Old Telewests 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31,
1995.)                                                                                                                                                                                                      
|4.16 |  | The Telewest 1995 Restricted Share Scheme. (Incorporated by reference to the Companys Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September
22, 1995, as amended.)                                                                                                                                                                                   
|4.17 |  | The Old Telewest Sharesave Scheme. (Incorporated by reference to Old Telewests 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31,
1995.)                                                                                                                                                                                                             



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|4.18 |  | The Telewest 1995 Sharesave Scheme. (Incorporated by reference to the Companys Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22,
1995, as amended.)                                                                                                                                                                                                                                            
|4.19 |  | The Old Telewest Executive Share Option Scheme No. 1. (Incorporated by reference to Old Telewests 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 31, 1995.)                                                                                                                                                                                                                                            
|4.20 |  | The Telewest 1995 Executive Share Option Scheme No. 1. (Incorporated by reference to the Companys Registration Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended.)                                                                                                                                                                                                                         
|4.21 |  | The Old Telewest Executive Share Option Scheme No. 2. (Incorporated by reference to Old Telewests 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 31, 1995.)                                                                                                                                                                                                                                            
|4.22 |  | The Telewest 1995 Executive Share Option Scheme No. 2. (Incorporated by reference to the Companys Registration Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended.)                                                                                                                                                                                                                         
|4.23 |  | The Old Telewest Share Participation Scheme. (Incorporated by reference to Old Telewests 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31,
1995.)                                                                                                                                                                                                                                                     
|4.24 |  | The Telewest 1995 Share Participation Scheme. (Incorporated by reference to the Companys Registration Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended.)                                                                                                                                                                                                                                  
|4.25 |  | Amended and Restated Deposit Agreement, dated as of November 30, 1994 (as amended as of October 2, 1995), among the Company, The Bank of New York, as Depositary, and the holders from time to
time of American Depositary Receipts issued thereunder. (Incorporated by reference to the Companys 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996.)                                             
|4.26 |  | Form of American Depositary Receipt (included in Exhibit 4.25).                                                                                                                                                                                                                                                                                                                                                                                     
|4.27 |  | Amendments number 1 through 9 to the General Purchasing Agreement referred to in Exhibit 4.13. (Incorporated by reference to Amendment No. 1 to the Companys Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the Securities and Exchange Commission on June 19, 1998.) (3)                                                                                                                                              
|4.28 |  | Employment Agreement, dated August 7, 1997, between Charles Burdick and Telewest CGL (Incorporated by reference to Telewests Annual Report on Form 10-K for the period ended December 31,
1997 filed with the Securities and Exchange Commission on March 31, 1998.)                                                                                                                                                                               
|4.29 |  | Amended and Restated Relationship Agreement, dated as of June 26, 1998, by and among the Company, the MediaOne Affiliates, TINTA, the TINTA Affiliate, Cox, the Cox Affiliate, SBC
International, Inc. and the SBC Affiliate. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange Commission on April 8, 1999 (Registration No. 333-09792).)                                   
|4.30 |  | Form of Amendment No. 1 to the Registration Rights Agreement by and among the Company, the Liberty Media Affiliate, the MediaOne Affiliates, the SBC Affiliate, Southwestern Bell International
Holdings (UK-2) Corporation, the Cox Affiliate, GUHL and Vivendi. (Incorporated by reference to the Companys Registration Statement on Form S-4 as filed with the Securities and Exchange Commission on June 29, 1998 (Registration No.
33-50201).)
|4.31 |  | Employment Agreement, dated September 21, 1998, between Anthony Illsley (former chief executive officer of the Company) and the Company, as amended on January 17, 2000. (Incorporated by
reference to the Companys Registration Statement on Form F-4 as filed with the Securities and Exchange Commission on March 6, 2000 (Registration No. 333-11602).)                                                                                        
|4.32 |  | Amended and Restated Relationship Agreement, dated as of May 21, 1999, by and among the Company, the MediaOne Affiliates, Liberty Media International and the Liberty Media International
Affiliate. (Incorporated by reference to the Companys 1998 Annual Report on Form 20-F as filed with the Securities and Exchange Commission on June 30, 1999.)                                                                                            
|4.33 |  | Form of draft Amended and Restated Relationship Agreement, by and among the Company, Microsoft, the MediaOne Affiliates and the Liberty Media Affiliate. (Incorporated by reference to the
Companys Registration Statement on Form F-3 as filed with the Securities and Exchange Commission on October 4, 1999 (Registration No. 333-10964).)                                                                                                      
|4.34 |  | Form of Amendment No. 2 to the Registration Rights Agreement, by and among the Company,                                                                                                                                                                                                                                                                                                                                                             





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|      |  | Microsoft, The MediaOne Affiliates and the Liberty Media Affiliate. (Incorporated by reference to the Companys Registration Statement on Form F-3 as filed with the Securities and
Exchange Commission on October 4, 1999 (Registration No. 333-10964).)                                                                                                                                
|4.35  |  | Agreement Relating to the Merger of Flextech and the Company, dated December 16, 1999, between the Company and Flextech. (Incorporated by reference to the Companys Registration
Statement on Form F-4 as filed with the Securities and Exchange Commission on March 6, 2000 (Registration No. 333-11602).)                                                                             
|4.36  |  | Employment Agreement, dated December 1, 1999, between Anthony W.P. Stenham and the Company. (Incorporated by reference to the Companys Registration Statement on Form F-4 as filed with
the Securities and Exchange Commission on March 6, 2000 (Registration No. 333-11602).)                                                                                                          
|4.37  |  | Form of Service Agreement between Mark Luiz and Flextech plc, as amended. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed
with the Securities and Exchange Commission on July 1, 2002.)                                                                                                                                 
|4.38  |  | Form of Service Agreement between Adam Singer and Flextech plc. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed with the
Securities and Exchange Commission on July 1, 2002.)                                                                                                                                           
|4.39  |  | Employment Agreement, dated October 21, 1998, between Stephen Cook and the Company. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended December 31,
2001 filed with the Securities and Exchange Commission on July 1, 2002.)                                                                                                                       
|4.40  |  | Form of the Telewest 2000 All Employee Share Scheme. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities
and Exchange Commission on July 1, 2002.)                                                                                                                                                      
|4.41  |  | Amendment Agreement Relating to the Revised New Relationship Agreement, dated as of May 18, 2001, between Microsoft, Liberty Media International, Inc., Liberty UK Holdings, Inc., Liberty UK,
Inc. and the Company (Incorporated by reference to Amendment No. 3 to Statement on Schedule 13-D of Liberty Media filed with the Securities and Exchange Commission on November 23, 2001.)
|4.42  |  | Appointment as Non-Executive Chairman of the Board of Directors of the Company, effective from December 1, 1999, as amended, between Anthony W.P. Stenham and the Company. (Incorporated by
reference to Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities and Exchange Commission on July 1, 2002.)                                
|4.43  |  | Telewest Long Term Incentive Plan. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities and Exchange
Commission on July 1, 2002.)                                                                                                                                                                        
|4.44  |  | Telewest Equity Participation Plan. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities and Exchange
Commission on July 1, 2002.)                                                                                                                                                                       
|4.45  |  | Amendment to Service Agreement, dated October 14, 1998, between Charles Burdick and the Company. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended
December 31, 2001 filed with the Securities and Exchange Commission on July 1, 2002.)                                                                                                          
|7     |  | Computation of deficiency of earnings to fixed charges.(1)                                                                                                                                                                                                                                                                                                                               
|8     |  | List of Subsidiaries of the Company. (Incorporated by reference to Telewests Annual Report on Form 20-F for the period ended December 31, 2001 filed with the Securities and Exchange
Commission on July 1, 2002.)                                                                                                                                                                      
|12.1* |  | Certification pursuant to Rule 15d-14(a), as adopted by Section 302 of the Sarbanes-Oxley Act of 2002, signed by Barry R. Elson, Acting Chief Executive Officer.                                                                                                                                                                                                                         
|12.2* |  | Certification pursuant to Rule 15d-14(a), as adopted by Section 302 of the Sarbanes-Oxley Act of 2002, signed by Neil Smith, Group Finance Director.                                                                                                                                                                                                                                     
|12.3* |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, signed by Barry R. Elson, Acting Chief Executive Officer.                                                                                                                                                                                                                 
|12.4* |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, signed by Neil Smith, Group Finance Director.                                                                                                                                                                                                                             



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|* | Filed herewith.
|- | ---------------



|(1) | Incorporated by reference to the companys 2002 Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 30, 2003.
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|(2) | Portions of this agreement have been accorded confidential treatment by the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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|(3) | Portions of this agreement have been accorded confidential treatment by the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
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