**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

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

**For the quarterly periodended September 30, 2006**

**OR**

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

**Commission File No. 000-50886**

**NTL INCORPORATED**

(Exact name of registrant as specified in its charter)

**NTL INVESTMENT HOLDINGS LIMITED**

(Additional Registrant)

| **Delaware**                                   |   | **59-3778247**       |
|------------------------------------------------|--------|----------------------|
| (State or other  jurisdiction of incorporation |   | (I.R.S. Employer     |
| or organization)                               |   | Identification  No.) |
| **909  Third Avenue, Suite 2863**         |   | ** **           |
| **New  York, New York**                        |   | **10022**            |
| (Address  of principal executive offices)      |   | (Zip Code)           |

**(212) 906-8440**

(Registrant’stelephone number, including area code)

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x  No o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct. (Check one):

| Large accelerated filer x | Accelerated filer o | Non-accelerated filer o |
|---------------------------|---------------------|-------------------------|

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Act). Yes oNo x

APPLICABLEONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVEYEARS:

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court. Yes x  No o

Thenumber of shares outstanding of the registrant’s common stock as of November 6,2006 was 326,218,427.

TheAdditional Registrant meets the conditions set forth in General Information H(1)(a)and (b) of Form 10-Q and is filing this form with the reduced disclosure format.See Note Concerning NTLIH.

 

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**NTL INCORPORATEDFORM 10-QQUARTER ENDED SEPTEMBER 30, 2006INDEX**

|                                                                                                                              | ** ** | **Page** |
|------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| PART I.  FINANCIAL INFORMATION                                                                                          |       | 5        |
| Item  1. Financial Statements                                                                                                |       | 5        |
| **NTL Incorporated**                                                                           |       |     |
| Condensed Consolidated Balance Sheets—September 30,  2006 and December 31, 2005                               |       | 5        |
| Condensed Consolidated Statements of Operations—Three  and Nine Months ended September 30, 2006 and 2005 |       | 6        |
| Condensed Consolidated Statements of Cash Flows—Nine  Months ended September 30, 2006 and 2005                     |       | 7        |
| Notes to Condensed Consolidated Financial Statements                                                                         |       | 8        |
| **NTL Investment Holdings Limited**                                                       |       |     |
| Condensed Consolidated Balance  Sheets—September 30, 2006 and December 31, 2005                               |       | 31       |
| Condensed Consolidated Statements of Operations—Three  and Nine Months ended September 30, 2006 and 2005 |       | 32       |
| Condensed Consolidated Statements of Cash Flows—Nine  Months ended September 30, 2006 and 2005                     |       | 33       |
| Notes to Condensed Consolidated Financial Statements                                                                         |       | 34       |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations                          |       | 48       |
| Item 3. Quantitative and Qualitative Disclosures about  Market Risk                                                          |       | 69       |
| Item 4. Controls and Procedures                                                                                              |       | 70       |
| PART II.  OTHER INFORMATION                                                                                             |       | 72       |
| Item  1. Legal Proceedings                                                                                                   |       | 72       |
| Item  1A. Risk Factors                                                                                                       |       | 72       |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                                         |       | 72       |
| Item 3. Defaults Upon Senior Securities                                                                                      |       | 72       |
| Item 4. Submission of Matters to a Vote of Security  Holders                                                                 |       | 72       |
| Item  5. Other Information                                                                                                   |       | 72       |
| Item 6.  Exhibits                                                                                                            |       | 72       |
| SIGNATURES                                                                                                                   |       | 75       |

 

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**“S**afeHarbor” Statement under the Private Securities Litigation Reform Act of 1995:

Various statementscontained in this document constitute “forward-looking statements” asthat term is defined under the Private Securities Litigation Reform Act of1995. Words like “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expects,”“estimates,” “projects,” “positioned,” “strategy,” and similar expressionsidentify these forward-looking statements, which involve known andunknown risks, uncertainties and other factors that may cause our actualresults, performance or achievements or industry results to be materiallydifferent from those contemplated, projected, forecasted, estimated orbudgeted, whether expressed or implied, by these forward-looking statements.These factors include:

·       the failure to obtain andretain expected synergies from the merger of the legacy NTL and Telewestbusinesses and the acquisition of Virgin Mobile;

·       rates of success inexecuting, managing and integrating key acquisitions, including the merger withTelewest and the acquisition of Virgin Mobile;

·       the ability to achievebusiness plans for the combined company;

·       the ability to manage andmaintain key customer relationships;

·       the ability to fund debtservice obligations through operating cash flow;

·       the ability to obtainadditional financing in the future and react to competitive and technologicalchanges;

·       the ability to comply withrestrictive covenants in our indebtedness agreements;

·       the ability to controlcustomer churn;

·       the ability to compete witha range of other communications and content providers;

·       the effect of technologicalchanges on our businesses;

·       the functionality or marketacceptance of new products that we may introduce;

·       possible losses in revenuesdue to systems failures;

·       the ability to maintain andupgrade our networks in a cost-effective and timely manner;

·       the reliance on single-sourcesuppliers for some equipment and software;

·       the ability to provideattractive programming at a reasonable cost; and

·       the extent to which ourfuture earnings will be sufficient to cover our fixed charges.

These and other factorsare discussed in more detail under Item 1A. “Risk Factors” and elsewhere in ourForm 10-K filed with the SEC on February 28, 2006 and the Form 10-Kof NTL Holdings Inc., our wholly-owned subsidiary, filed with the SEC on March 1,2006. We assume no obligation to update our forward-looking statements toreflect actual results, changes in assumptions or changes in factors affectingthese statements.

**Note Concerning NTLIH**

This quarterly report on Form 10-Q (exceptingfinancial statements responsive to Part I, Item 1) covers both NTL Incorporatedand NTL Investment Holdings Limited (“NTLIH’’), an English company with anaddress at NTL House, Bartley Wood Business Park, Hook, Hampshire, RG27 9UP,United Kingdom, a wholly-owned subsidiary of NTL Cable PLC and a wholly-ownedindirect subsidiary of NTL Incorporated. NTLIH is not an accelerated filer. NTLIH is one of the guarantors of NTLCable PLC’s 9.75% Senior Notes due 2014 (sterling denominated), 8.75% SeniorNotes due 2014 (euro denominated), 

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8.75% Senior Notes due2014 (U.S. dollar denominated), and 9.125% Senior Notes due 2016 (U.S. dollardenominated). NTLIH’s guarantee of those notes is not deemed to beunconditional.

NTLIH carries on the samebusiness as NTL Incorporated, and is the principal borrower under NTLIncorporated’s Senior Credit Facility. In this quarterly report, unless thecontext otherwise requires, the terms “NTL,” “the “Company,“ “we,” “us,” “our”and similar terms refer to the consolidated business of NTL Incorporated,including NTLIH and its subsidiaries. Unless otherwise indicated, thediscussion contained in this report applies to NTLIH as well as NTLIncorporated.

**Note ConcerningEffect of Merger with Telewest**

On March 3, 2006, NTL Holdings Inc. (formerlyknown as NTL Incorporated) merged with a subsidiary of NTL Incorporated (formerlyknown as Telewest Global, Inc.). Because this transaction is accounted foras a reverse acquisition, the financial statements included in this Form 10-Qfor the period through March 3, 2006 are those of the corporation nowknown as NTL Holdings Inc. For the period since March 3, 2006 thesefinancial statements reflect the reverse acquisition of Telewest Global, Inc.(“Telewest”). See note 1 to the financial statements.

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**PART I—FINANCIALINFORMATION**

**ITEM 1. FINANCIALSTATEMENTS**

**NTLINCORPORATEDCONDENSED CONSOLIDATED BALANCE SHEETS (in millions)**

| ** **                                                                                                         | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                         | ** ** | **(Unaudited)**              | ** ** | **(See Note)**         | ** ** |
| **Assets**                                                                                                         |       |                         |       |                        |       |   |   |   |   |
| Current assets                                                                                                     |       |                         |       |                        |       |   |   |   |   |
| Cash  and cash equivalents                                                                                         |       |                         | £     | 302.2                       |       |   |   | £ | 735.2 |   |   |
| Restricted  cash                                                                                                   |       |                         | 6.7        |                        |       |   | 3.4 |   |   |
| Marketable  securities                                                                                             |       |                         | —     |                        |       |   | 96.9 |   |   |
| Accounts  receivable—trade, less allowances for doubtful accounts of £58.9 (2006) and  £41.7 (2005) |       |                         | 409.7      |                        |       |   | 191.8 |   |   |
| Inventory  for re-sale                                                                                             |       |                         | 12.1       |                        |       |   | — |   |   |
| Programming  inventory                                                                                             |       |                         | 55.5       |                        |       |   | — |   |   |
| Prepaid  expenses and other current assets                                                                         |       |                         | 94.7       |                        |       |   | 112.4 |   |   |
| Total  current assets                                                                                              |       |                         | 880.9      |                        |       |   | 1,139.7 |   |   |
| Fixed  assets, net                                                                                                 |       |                         | 6,088.6    |                        |       |   | 3,294.9 |   |   |
| Goodwill                                                                                                           |       |                         | 2,273.1    |                        |       |   | — |   |   |
| Reorganization  value in excess of amounts allocable to identifiable assets                                        |       |                         | 193.0      |                        |       |   | 193.0 |   |   |
| Customer  lists, net                                                                                               |       |                         | 1,129.4    |                        |       |   | 247.6 |   |   |
| Other  intangible assets, net                                                                                      |       |                         | 66.5       |                        |       |   | 2.4 |   |   |
| Equity  investments                                                                                                |       |                         | 387.5      |                        |       |   | — |   |   |
| Other  assets, net of accumulated amortization of £15.7 (2006) and £32.2 (2005)                          |       |                         | 173.9      |                        |       |   | 110.9 |   |   |
| **Total  assets**                                                                                                  |       |                         | £     | 11,192.9                    |       |   |   | £ | 4,988.5 |   |   |
| **Liabilities and shareholders’  equity**                                                                     |       |                         |       |                        |       |   |   |   |   |
| Current liabilities                                                                                                |       |                         |       |                        |       |   |   |   |   |
| Accounts  payable                                                                                                  |       |                         | £     | 369.8                       |       |   |   | £ | 176.9 |   |   |
| Accrued  expenses and other current liabilities                                                                    |       |                         | 637.8      |                        |       |   | 291.1 |   |   |
| Interest  payable                                                                                                  |       |                         | 94.4       |                        |       |   | 37.8 |   |   |
| Deferred  revenue                                                                                                  |       |                         | 263.2      |                        |       |   | 103.2 |   |   |
| Current  portion of long-term debt                                                                                 |       |                         | 151.5      |                        |       |   | 0.8 |   |   |
| Total  current liabilities                                                                                         |       |                         | 1,516.7    |                        |       |   | 609.8 |   |   |
| Long-term  debt, net of current portion                                                                            |       |                         | 6,055.5    |                        |       |   | 2,279.2 |   |   |
| Deferred  revenue and other long-term liabilities                                                                  |       |                         | 194.1      |                        |       |   | 134.3 |   |   |
| Deferred  income taxes                                                                                             |       |                         | 77.0       |                        |       |   | 9.2 |   |   |
| Total liabilities                                                                                                  |       |                         | 7,843.3    |                        |       |   | 3,032.5 |   |   |
| Commitments  and contingent liabilities                                                                            |       |                         |       |                        |       |   |   |   |   |
| Minority  interest                                                                                                 |       |                         | 1.0        |                        |       |   | 1.0 |   |   |
| Shareholders’  equity                                                                                         |       |                         |       |                        |       |   |   |   |   |
| Common  stock                                                                                                      |       |                         | 1.8        |                        |       |   | 1.2 |   |   |
| Additional  paid-in capital                                                                                        |       |                         | 4,285.8    |                        |       |   | 2,671.0 |   |   |
| Treasury  stock                                                                                                    |       |                         | —     |                        |       |   | (114.0 | ) |   |
| Accumulated  other comprehensive income                                                                            |       |                         | 126.6      |                        |       |   | 45.5 |   |   |
| Accumulated  deficit                                                                                               |       |                         | (1,065.6   | )                           |       |   | (648.7 | ) |   |
| Total  shareholders’ equity                                                                                   |       |                         | 3,348.6    |                        |       |   | 1,955.0 |   |   |
| **Total liabilities and  shareholders’ equity**                                                               |       |                         | £     | 11,192.9                    |       |   |   | £ | 4,988.5 |   |   |

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Note:                      Thebalance sheet at December 31, 2005 has been derived from the auditedfinancial statements at that date.

See accompanying notes.

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**NTLINCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited) (in millions, except per share data)**

| ** **                                                                                                                           | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                           | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Revenue**                                                                                                                          |       | £                                               | 1,024.9    |                                                | £     | 482.7 |   | £ | 2,520.6 |   | £ | 1,463.0 |   |
| **Costs  and expenses**                                                                                                              | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating costs (exclusive of depreciation shown  separately below)                                                                  |       | (440.0                                               | )          | (200.2                                              | )          | (1,062.4 | ) | (603.1 | ) |
| Selling, general and administrative expenses                                                                                         |       | (267.1                                               | )          | (116.2                                              | )          | (648.7 | ) | (358.3 | ) |
| Other charges                                                                                                                        |       | (30.9                                                | )          | (1.3                                                | )          | (51.4 | ) | (2.4 | ) |
| Depreciation                                                                                                                         |       | (222.6                                               | )          | (142.3                                              | )          | (591.2 | ) | (402.2 | ) |
| Amortization                                                                                                                         |       | (73.9                                                | )          | (27.4                                               | )          | (166.3 | ) | (82.3 | ) |
|                                                                                                                                 |       | (1,034.5                                             | )          | (487.4                                              | )          | (2,520.0 | ) | (1,448.3 | ) |
| **Operating  (loss) income**                                                                                                         |       | (9.6                                                 | )          | (4.7                                                | )          | 0.6 |   | 14.7 |   |
| **Other  income (expense)**                                                                                                          | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest income and other, net                                                                                                       |       | 7.1                                                  |       | 6.8                                                 |       | 24.3 |   | 21.6 |   |
| Interest expense                                                                                                                     |       | (113.2                                               | )          | (51.7                                               | )          | (332.6 | ) | (180.2 | ) |
| Share of income (loss) from equity investments                                                                                       |       | 3.9                                                  |       | (0.2                                                | )          | 8.4 |   | — |   |
| Foreign currency transaction gains (losses)                                                                                          |       | 6.3                                                  |       | (13.1                                               | )          | (97.8 | ) | (29.9 | ) |
| Loss on extinguishment of debt                                                                                                       |       | (0.5                                                 | )          | (2.0                                                | )          | (32.9 | ) | (2.0 | ) |
| Gains (losses) on derivative instruments                                                                                             |       | 1.6                                                  |       | —                                              |       | (1.9 | ) | — |   |
| **Loss  from continuing operations before income taxes, minority interest and  cumulative effect of change in accounting principle** |       | (104.4                                               | )          | (64.9                                               | )          | (431.9 | ) | (175.8 | ) |
| Income tax benefit  (expense)                                                                                                        |       | 0.9                                                  |       | 12.4                                                |       | 10.8 |   | (8.7 | ) |
| Minority interest                                                                                                                    |       | (0.7                                                 | )          | (1.0                                                | )          | — |   | (1.0 | ) |
| Cumulative effect  of change in accounting principle                                                                                 |       | —                                               |       | —                                              |       | 1.2 |   | — |   |
| Loss from continuing operations                                                                                                      |       | (104.2                                               | )          | (53.5                                               | )          | (419.9 | ) | (185.5 | ) |
| **Discontinued  operations**                                                                                                         | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income from  discontinued operations before income taxes                                                                             |       | —                                               |       | —                                              |       | — |   | 5.5 |   |
| Gain on disposal  of assets                                                                                                          |       | 8.1                                                  |       | 1.4                                                 |       | 8.1 |   | 657.4 |   |
| Income tax  expense                                                                                                                  |       | —                                               |       | —                                              |       | — |   | (0.2 | ) |
| **Income  from discontinued operations**                                                                                             |       | 8.1                                                  |       | 1.4                                                 |       | 8.1 |   | 662.7 |   |
| **Net  (loss) income**                                                                                                               |       | £                                               | (96.1      | )                                                   | £     | (52.1 | ) | £ | (411.8 | ) | £ | 477.2 |   |
| **Basic  and diluted loss from continuing operations per share**                                                                     |       | £                                               | (0.32      | )                                                   | £     | (0.25 | ) | £ | (1.49 | ) | £ | (0.87 | ) |
| **Basic  and diluted income from discontinued operations per share**                                                                 |       | £                                               | 0.02       |                                                | £     | 0.01 |   | £ | 0.03 |   | £ | 3.10 |   |
| **Basic  and diluted net (loss) income per share**                                                                                   |       | £                                               | (0.30      | )                                                   | £     | (0.24 | ) | £ | (1.46 | ) | £ | 2.23 |   |
| **Average number of shares  outstanding**                                                                                            |       | 322.0                                                |       | 212.8                                               |       | 282.5 |   | 214.0 |   |

 

See accompanying notes.

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**NTLINCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited) (in millions)**

| ** **                                                    | ** ** | **Nine months ended  September 30,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                    | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| **Net  cash provided by operating activities**                |       | £                                              | 512.2      |   | £ | 239.6 |   |
| **Investing activities**                                      | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Purchase of fixed assets                                      |       | (397.0                                              | )          | (216.3 | ) |
| Income from equity investments                                |       | 7.3                                                 |       | — |   |
| Acquisition of Telewest, net of cash acquired                 |       | (2,024.2                                            | )          | — |   |
| Acquisition of Virgin Mobile, net of cash acquired            |       | (423.5                                              | )          | — |   |
| Proceeds from the sale of fixed assets                        |       | 0.9                                                 |       | 2.6 |   |
| Decrease in restricted cash                                   |       | 5.1                                                 |       | 12.2 |   |
| Proceeds from sale of Broadcast operations, net               |       | —                                              |       | 1,229.0 |   |
| Proceeds from sale of Ireland operations, net                 |       | —                                              |       | 216.2 |   |
| Net cash (used in) provided by investing activities           |       | (2,831.4                                            | )          | 1,243.7 |   |
| **Financing activities**                                      | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Proceeds from employee stock option exercises                 |       | 35.2                                                |       | 4.8 |   |
| Purchase of stock                                             |       | —                                              |       | (114.0 | ) |
| New borrowings                                                |       | 9,046.1                                             |       | — |   |
| Principal payments on long-term debt                          |       | (7,038.0                                            | )          | (781.7 | ) |
| Financing fees                                                |       | (122.2                                              | )          | — |   |
| Capital lease payments                                        |       | (26.7                                               | )          | (0.6 | ) |
| Dividends paid                                                |       | (5.1                                                | )          | — |   |
| Net cash provided by (used in) financing activities           |       | 1,889.3                                             |       | (891.5 | ) |
| **Cash flow from discontinued  operations**                   | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Net cash used by operating activities                         |       | —                                              |       | (14.3 | ) |
| Net cash used by investing activities                         |       | —                                              |       | (4.1 | ) |
| Net cash used in discontinued operations                      |       | —                                              |       | (18.4 | ) |
| Effect of  exchange rate changes on cash and cash equivalents |       | (3.1                                                | )          | 14.2 |   |
| (Decrease)  increase in cash and cash equivalents             |       | (433.0                                              | )          | 587.6 |   |
| Cash and cash  equivalents, beginning of period               |       | 735.2                                               |       | 125.2 |   |
| Cash and cash  equivalents, end of period                     |       | £                                              | 302.2      |   | £ | 712.8 |   |

 

See accompanying notes.

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**NTL INCORPORATED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**Note 1—Basisof Presentation**

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with U.S. GenerallyAccepted Accounting Principles for interim financial information and with the rules andregulations of the Securities and Exchange Commission. Accordingly, they do notinclude all of the information and footnotes required by U.S. GenerallyAccepted Accounting Principles for complete financial statements. In theopinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included.Operating results for the nine months ended September 30, 2006 are notnecessarily indicative of the results that may be expected for the year ending December 31,2006. For further information, refer to the consolidated financial statementsand footnotes thereto included in the Annual Report on Form 10-K forNTL Holdings Inc. for the year ended December 31, 2005.

On March 3, 2006, NTL Holdings Inc. (“NTL Holdings”),formerly known as NTL Incorporated, merged with a subsidiary of NTLIncorporated (formerly known as Telewest Global, Inc., or “Telewest”). Themerger has been accounted for as a reverse acquisition in which NTL Holdings istreated as the accounting acquirer, primarily because NTL Holdings shareholdersowned approximately 75% of the common stock upon completion of the merger.Following the merger, Telewest changed its name to NTL Incorporated. As aresult, the historical financial statements of NTL Holdings became thehistorical financial statements of NTL Incorporated as of the completion of themerger. Therefore, the results for the three and nine months ended September 30,2005 reflect the operations and cash flows of NTL Holdings only and the balancesheet at December 31, 2005 reflects the financial position of NTL Holdingsonly. The results of operations and cash flows for Telewest, the acquiredcompany for accounting purposes, are included in the consolidated financialstatements from March 3, 2006, the date on which the merger was completed.

Certain prior periodbalances have been reclassified to conform to the current period presentation.

**Note 2—SignificantAccounting Policies**

*Revenue Recognition*

We recogniserevenue only when it is realized or realizable and earned. We recognise revenuewhen all of the following are present:

·       persuasiveevidence of an arrangement exists between us and our customers;

·       deliveryhas occurred or the services have been rendered;

·       theprice for the service is fixed or determinable; and

·       collectibilityis reasonably assured.

*Telephone, cabletelevision and internet revenues*are recognised as the services are provided to customers.

*Installationrevenues*are recognised inaccordance with the provisions of FASB Statement No. 51, FinancialReporting by Cable Television Companies, inrelation to connection and activation fees for cable television, as well astelephone and internet services, on the basis that we market and maintain aunified fiber network through which we provide all of these services.Installation revenues are recognised at the time the installation has beencompleted to the extent that those fees are less than direct selling costs.Installation fees in excess of direct selling costs are deferred and amortizedover the expected life of the customer’s connection.

*Rental revenue*in respect of line rentals and rental of equipmentprovided to customers is recognised on a straight-line basis over the term ofthe rental agreement.

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**NTL INCORPORATED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

*Mobile handset andother equipment revenue*isrecognised when the goods have been delivered and title has passed.

*Mobile servicerevenues*include airtime,data, roaming and long-distance revenues and are invoiced and recorded as partof a periodic billing cycle. Service revenues are recognised as the servicesare provided. At the end of each period, adjustments are recorded to deferrevenue relating to services billed in advance and to accrue for earned butunbilled services.

Contract and non-contract post-pay customers arebilled in arrears based on usage and revenue is recognised when the service isrendered and collectibility is reasonably assured. Revenue from non-contractpre-pay customers is recorded as deferred revenue prior to commencement ofservices and is recognised as the services are rendered or usage expires.

*Bundled servicesrevenue*are recognised inaccordance with the provisions of EITF No 00-21, Accounting forrevenue arrangements with multiple deliverables,to assess whether the components of the bundled services should be recognisedseparately.

For bundled packages thathave separately identifiable components, the total consideration is allocatedto the different components based on their relative fair values. Where the fairvalue of a delivered component cannot be determined reliably but the fair valueof the undelivered component can be, the fair value of the undeliveredcomponent is deducted from the total consideration and the net amount isallocated to the delivered components based on the “residual value” method.

*SubscriberAcquisition Costs*

Costs incurred in respectto the acquisition of customers of our Mobile segment, including payments todistributors and the cost of handset promotions, are expensed as incurred.

**Note 3—Acquisitionsand Disposals**

*Acquisition ofVirgin Mobile*

On July 4, 2006, we acquired 100% of theoutstanding shares and options of Virgin Mobile Holdings (UK) plc (“VirginMobile”) through a U.K. Scheme of Arrangement. Virgin Mobile is the largestmobile virtual network operator in the United Kingdom, with approximately 4.5million customers.

The total purchase price of approximately£952.2 million included cash of approximately £418.2 million, commonstock valued at £518.8 million and estimated direct transaction costs of£15.2 million. The average market price per share of common stock utilizedin determining the value of new common stock issued of £15.07 ($26.59) is basedon an average of the closing prices of NTL common stock divided by the Telewestacquisition conversion ratio of 2.5 times for a range of trading days (January 12,January 13, January 17, January 18, January 19) around theannouncement date of the proposed acquisition (January 16, 2006).

We financed the cash portion of the offer andtransactional expenses through £475 million of additional borrowings under oursenior credit facility and cash on hand.

On May 24, 2006, we received approval by amajority of the shareholders of Virgin Mobile, other than those associated withaffiliates of the Virgin Group, to enter into a trademark license agreementwith Virgin Enterprises Limited under which we are entitled to use certainVirgin trademarks within the United Kingdom and Ireland. The agreement wasentered into on the same date and is an exclusive license covering a number ofaspects of our consumer business, including the provision of communicationsservices (such as internet, television, fixed line telephony, and upon theacquisition of Virgin Mobile, mobile telephony), the acquisition and brandingof sports, movie and other premium television content, and the branding andsale of certain communications equipment related to our consumer businesses,such 

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as set top boxes and cablemodems. The agreement provides for a royalty of 0.25% per annum of our revenuefrom the relevant businesses, subject to a minimum annual royalty of£8.5 million (the royalty would have been approximately £9 million basedon combined historical NTL and Telewest 2005 revenues including revenue fromVirgin Mobile and our subsidiary Virgin.net). The agreement replaces theexisting license agreement under which our subsidiary Virgin.net was entitledto use the Virgin brand in relation to its internet business. The agreement hasa term of 30 years. It can be terminated after 10 years on one year’s notice,and it is subject to earlier termination by us in certain other circumstances,including (subject to specified payments) upon a change of control. Theagreement also entitles us to use a corporate name that includes the Virginname. We expect to commence the proposed re-branding of our consumer operationsearly in 2007 and the re-branding is expected to include a change in name ofthe corporate parent.

Thetotal purchase price of approximately £952.2 million has been allocated asfollows (in millions) (unaudited):
|                                                       | ** ** | **Acquisition  Date** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|
| Cash and cash  equivalents, including restricted cash |       |                  | £     | 10.0 |   |   |
| Accounts  receivable                                  |       |                  | 45.4       |   |   |
| Prepaid expenses  and other current assets            |       |                  | 24.6       |   |   |
| Fixed assets                                          |       |                  | 18.5       |   |   |
| Inventory                                             |       |                  | 9.1        |   |   |
| Amortizable intangible  assets:                       |       |                  |       |   |   |
| Customer lists                                        |       |                  | 280.0      |   |   |
| Contractual relationships                             |       |                  | 6.0        |   |   |
| Intangible assets with  indefinite lives:             |       |                  |       |   |   |
| Goodwill                                              |       |                  | 918.2      |   |   |
| Other assets, net                                     |       |                  | 1.4        |   |   |
| Accounts payable                                      |       |                  | (47.2      | ) |   |
| Long-term debt,  including current portion            |       |                  | (200.0     | ) |   |
| Other current  liabilities                            |       |                  | (111.2     | ) |   |
| Other long-term  liabilities                          |       |                  | (2.6       | ) |   |
| Total purchase price                                  |       |                  | £     | 952.2 |   |   |

 

The allocation of thepurchase price to assets acquired and liabilities assumed is preliminary,pending finalization of valuations performed by third party experts,finalization of management’s integration plan pertaining to the acquiredbusiness, completion of analysis of deferred tax balances and completion of areview of certain other historical matters.

*Amortizableintangible assets*

Of the total purchase price, approximately £286.0million has been allocated to amortizable intangible assets including customerlists and contractual relationships. Customer lists represent existingcontracts that relate primarily to underlying customer relationships pertainingto the services provided by Virgin Mobile. The fair value of these assets wasdetermined utilizing the income approach. We expect to amortize the fair valueof these assets on a straight-line basis over weighted average estimated usefullives of four years.

Contractual relationshipsrepresent the fair value of certain contracts with distributors of our productsand services.  The fair value of thesecontracts was determined utilizing the income approach. We expect to amortizethe fair value of these assets on a straight-line basis over the remaining lifeof the contracts of approximately three years.

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*Reverse Acquisitionof Telewest*

On March 3, 2006, NTL Holdings merged with asubsidiary of NTL Incorporated and the merger has been accounted for as areverse acquisition of Telewest using the purchase method. This merger createdthe UK’s largest provider of residential broadband and the UK’s leadingprovider of triple play services. In connection with this transaction, Telewestchanged its name to NTL Incorporated.

The total purchase price of approximately£3.5 billion includes cash of approximately £2.3 billion, commonstock valued at £1.1 billion, stock options with a fair value of£29.8 million and estimated direct transaction costs of£25.1 million. The average market price per share of common stock utilizedin determining the value of the new common stock issued of £13.00 ($22.90) isbased on an average of the closing prices of Telewest common stock for a rangeof trading days (September 29, September 30, October 3, October 4and October 5, 2005) around the announcement date of the proposed merger (October 3,2005). The cash payment of £2.3 billion was based on the redemption valueof $16.25 (£9.30) per share of Telewest redeemable common stock issued inexchange for Telewest common stock in the transaction and 246.0 millionshares of Telewest redeemable common stock so issued.

The outstanding options to purchase shares of NTLHoldings common stock were exchanged for options to purchase shares of NTLIncorporated new common stock with the same terms and conditions.

The outstanding options to purchase shares of Telewestcommon stock were converted into options to purchase shares of NTL Incorporatednew common stock at an option price calculated in accordance with the formulain the merger agreement. In accordance with the terms of Telewest’sequity-based plans, a significant proportion of Telewest’s outstanding optionsthat were granted prior to March 3, 2006 vested upon completion of themerger. All vested and unvested options of Telewest have been recorded at theirfair value by using the Black-Scholes option pricing model.

The total purchase price of approximately£3.5 billion has been allocated as follows (in millions) (unaudited):
|                                                       | ** ** | **Acquisition  Date** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|
| Cash and cash  equivalents, including restricted cash |       |                  | £     | 303.2 |   |   |
| Accounts  receivable                                  |       |                  | 156.5      |   |   |
| Prepaid expenses  and other current assets            |       |                  | 47.8       |   |   |
| Fixed assets                                          |       |                  | 2,957.2    |   |   |
| Programming  inventory                                |       |                  | 24.3       |   |   |
| Investments in  and loans to affiliates               |       |                  | 380.6      |   |   |
| Amortizable intangible  assets:                       |       |                  |       |   |   |
| Customer lists                                        |       |                  | 760.8      |   |   |
| Trade names                                           |       |                  | 10.7       |   |   |
| Licenses                                              |       |                  | 37.0       |   |   |
| Intangible assets with  indefinite lives:             |       |                  |       |   |   |
| Goodwill                                              |       |                  | 1,354.9    |   |   |
| Trade names                                           |       |                  | 17.9       |   |   |
| Accounts payable                                      |       |                  | (144.8     | ) |   |
| Long-term debt,  including current portion            |       |                  | (1,873.6   | ) |   |
| Other current  liabilities                            |       |                  | (457.2     | ) |   |
| Other long-term  liabilities                          |       |                  | (39.3      | ) |   |
| Deferred income  taxes                                |       |                  | (77.0      | ) |   |
| Total purchase price                                  |       |                  | £     | 3,459.0 |   |   |

 

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The allocation of thepurchase price to assets acquired and liabilities assumed is preliminary,pending finalization of valuations performed by third party experts,finalization of management’s integration plan pertaining to the acquiredbusiness and completion of a review of certain other historical matters. Duringthe quarter, we revised the preliminary allocation to reflect amendments to thefair value of certain amounts, principally deferred tax balances. The totalimpact of these adjustments resulted in a decrease in goodwill of £65.1million.

*Amortizableintangible assets*

Of the total purchase price, approximately £808.5million has been allocated to amortizable intangible assets including customerlists, trade names and licenses. Customer lists represent existing contractsthat relate primarily to underlying customer relationships pertaining to theservices provided by Telewest. The fair value of these assets was determinedutilizing the income approach. We expect to amortize the fair value of theseassets on a straight-line basis over weighted average estimated useful lives ofbetween five and eight years.

Trade names represent the Telewest and Blueyonderbrand names and the names of the Content segment’s TV channels. The fair valueof these assets was determined utilizing a relief from royalty method. Weexpect to amortize the fair value of these assets on a straight-line basis overweighted average estimated useful lives of between 1 and 9 years.

Licenses representcontracts to broadcast television content over a digital broadcasting system inthe United Kingdom. The fair value of these contracts was determined utilizingthe income approach. We expect to amortize the fair value of these assets on astraight-line basis over a weighted average estimated useful life of approximately4 years.

*Pro forma results*

The following pro forma financial information presentsthe combined results of operations of NTL, Telewest and Virgin Mobile as if theacquisitions had occurred as of the beginning of the periods presented (inmillions, except per share data). The pro forma results for the nine monthperiod ended September 30, 2006 include the results of Telewest from March 3,2006 (the acquisition date) and the results of Virgin Mobile from July 4,2006 (the acquisition date). The unaudited pro forma financial information isnot intended to represent or be indicative of the consolidated results ofoperations or financial condition of NTL that would have been reported had theacquisitions been completed as of the dates presented, and should not be takenas representative of the future consolidated results of operations or financialcondition of NTL.
|                                                                                                                                  | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                       | ** ** | **2006  Pro forma**                             | ** ** | **2005  Pro forma**                            | ** ** | **2006  Pro forma** | ** ** | **2005  Pro forma** | ** ** |
| Revenue                                                                                                                          |       |                                                 | £     | 1,031.3                                             |       |   |   | £ | 1,023.3 |   |   |   | £ | 3,080.6 |   |   |   | £ | 2,961.8 |   |   |
| Operating (loss)  income                                                                                                         |       |                                                 | (9.0       | )                                                   |       |   | 10.1 |   |   |   | (5.5 | ) |   |   | 61.4 |   |   |
| Loss from  continuing operations before income taxes, minority interest and cumulative  effect of change in accounting principle |       |                                                 | (103.7     | )                                                   |       |   | (123.2 | ) |   |   | (483.4 | ) |   |   | (374.9 | ) |   |
| Loss from  continuing operations                                                                                                 |       |                                                 | (103.5     | )                                                   |       |   | (116.1 | ) |   |   | (481.6 | ) |   |   | (399.8 | ) |   |
| Discontinued operations:                                                                                                         |       |                                                 |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from  discontinued operations                                                                                             |       |                                                 | 8.1        |                                                |       |   | 1.4 |   |   |   | 8.1 |   |   |   | 662.7 |   |   |
| Net (loss) income                                                                                                                |       |                                                 | £     | (95.4                                               | )          |   |   | £ | (114.9 | ) |   |   | £ | (473.5 | ) |   |   | £ | 262.9 |   |   |
| Loss from  continuing operations per share                                                                                       |       |                                                 | £     | (0.32                                               | )          |   |   | £ | (0.36 | ) |   |   | £ | (1.49 | ) |   |   | £ | (1.23 | ) |   |
| Net (loss) income per  share                                                                                                     |       |                                                 | £     | (0.29                                               | )          |   |   | £ | (0.35 | ) |   |   | £ | (1.46 | ) |   |   | £ | 0.81 |   |   |

 

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The pro forma financialinformation above includes the following material, non-recurring charges:write-offs of historical deferred finance charges of £32.9 million in the ninemonths ended September 30, 2006 and £59.8 million in the nine months endedSeptember 30, 2005; acquisition-related charges of £16.3 million in thenine months ended September 30, 2006; other charges includingrestructuring charges, of £51.9 million in the nine months ended September 30,2006 and £2.4 million in the nine months ended September 30, 2005.

*Disposal ofBroadcast and Ireland operations*

On December 1, 2004, we reached an agreement forthe sale of our Broadcast operations. The sale completed on January 31,2005. The Broadcast operations are accounted for as a discontinued operationand therefore, Broadcast’s results of operations have been removed from ourresults of continuing operations for the nine months ended September 30,2005. The results of operations of Broadcast have been excluded from thecomponents of “Loss from continuing operations” and shown under the caption “Incomefrom discontinued operations before income taxes” in the Statements ofOperations. Upon the sale, we recorded a gain on disposal of £514.6 million.

On May 9, 2005, we sold our operations in theRepublic of Ireland, comprising all of the ordinary shares of ntlCommunications (Ireland) Limited and ntl Irish Networks Limited and certainadditional assets, to MS Irish Cable Holdings B.V., an affiliate of MorganStanley & Co. International Limited, for an aggregate purchase priceof €333.4 million,or £225.5 million. The Ireland operations are accounted for as adiscontinued operation and therefore, Ireland’s results of operations have beenremoved from our results of continuing operations for the nine months ended September 30,2005. The results of operations of Ireland have been excluded from thecomponents of “Loss from continuing operations” and shown under the caption “Incomefrom discontinued operations before income taxes” in the Statements ofOperations. Upon the sale, we recorded a gain on disposal of £137.0 million,net of tax of £8.5 million. During the three months ended September 30,2006, we were able to release certain contingent tax liabilities of £8.1million relating to the disposal of our former Ireland operations

As a result of the sale ofour Broadcast and Ireland operations, we have accounted for the Broadcast andIreland operations as discontinued operations in 2005. Revenue from theBroadcast operations reported in discontinued operations for the three and ninemonths ended September 30, 2005 was £nil and £21.4 million, respectively.Pre-tax (loss) income from Broadcast operations, reported as pre-tax (loss)income from discontinued operations, for the three and nine months ended September 30,2005, was £nil and £3.0 million, respectively. Revenue from the Irelandoperations reported in discontinued operations for the three and nine monthsended September 30, 2005 was £nil and £25.6 million, respectively. Pre-taxincome from Ireland operations, reported as pre-tax income fromdiscontinued operations, for the three and nine months ended September 30,2005 was £nil and £2.5 million, respectively.

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

**Note 4—Goodwill andIntangible Assets**

Goodwill and intangible assets consist of (inmillions):
|                                                                                         | ** ** | **Estimated  Useful Life** | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------------------------------|------------|---------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                              | ** ** | **(Unaudited)**                 | ** ** |
| Goodwill and  intangible assets not subject to amortization:                            |       |                            |       |                         |       |                        |       |   |   |   |   |
| Goodwill                                                                                |       |                            |       |                         | £     | 2,273.1                     |       |   |   | £ | — |   |   |
| Reorganization value in excess of amounts allocable  to identifiable assets   |       |                            |       |                         | £     | 193.0                       |       |   |   | £ | 193.0 |   |   |
| Trade names                                                                             |       |                            |       |                         | 17.9       |                        |       |   | — |   |   |
|                                                                                    |       |                            |       |                         | £     | 210.9                       |       |   |   | £ | 193.0 |   |   |
| Intangible assets  subject to amortization:                                             |       |                            |       |                         |       |                        |       |   |   |   |   |
| Costs                                                                                   |       |                            |       |                         |       |                        |       |   |   |   |   |
| Contractual relationships                                                               |       | 2 – 3 years                |       |                         | £     | 6.0                         |       |   |   | £ | — |   |   |
| Trade names and licenses                                                                |       | 1 – 9 years                |       |                         | 50.7       |                        |       |   | 3.2 |   |   |
| Customer lists                                                                          |       | 4 – 8 years                |       |                         | 1,601.4    |                        |       |   | 560.6 |   |   |
|                                                                                    |       |                            |       |                         | £     | 1,658.1                     |       |   |   | £ | 563.8 |   |   |
| Accumulated amortization                                                                |       |                            |       |                         |       |                        |       |   |   |   |   |
| Contractual relationships                                                               |       |                            |       |                         | £     | 0.5                         |       |   |   | £ | — |   |   |
| Trade names and licenses                                                                |       |                            |       |                         | 7.6        |                        |       |   | 0.8 |   |   |
| Customer lists                                                                          |       |                            |       |                         | 472.0      |                        |       |   | 313.0 |   |   |
|                                                                                    |       |                            |       |                         | 480.1      |                        |       |   | 313.8 |   |   |
|                                                                                    |       |                            |       |                         | £     | 1,178.0                     |       |   |   | £ | 250.0 |   |   |

 

Estimated aggregateamortization expense for each of the five succeeding fiscal years from December 31,2005 is as follows: £249.8 million in 2006, £306.2 million in 2007, £235.0million in 2008, £202.1 million in 2009 and £160.1 million in 2010.

**Note 5—Long-TermDebt**

Long-termdebt consists of (in millions):
|                                         | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                              | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| 8.75% US Dollar  Senior Notes due 2014  |       |                         | £     | 227.1                       |       |   |   | £ | 247.3 |   |   |
| 9.75% Sterling  Senior Notes due 2014   |       |                         | 375.0      |                        |       |   | 375.0 |   |   |
| 8.75% Euro Senior  Notes due 2014       |       |                         | 152.5      |                        |       |   | 155.0 |   |   |
| 9.125% US Dollar  Senior Notes due 2016 |       |                         | 293.9      |                        |       |   | — |   |   |
| Senior Credit  Facility                 |       |                         | 5,042.0    |                        |       |   | 1,463.0 |   |   |
| Capital leases                          |       |                         | 110.7      |                        |       |   | 38.2 |   |   |
| Other                                   |       |                         | 5.8        |                        |       |   | 1.5 |   |   |
|                                    |       |                         | 6,207.0    |                        |       |   | 2,280.0 |   |   |
| Less: current  portion                  |       |                         | (151.5     | )                           |       |   | (0.8 | ) |   |
|                                    |       |                         | £     | 6,055.5                     |       |   |   | £ | 2,279.2 |   |   |

 

The effective interestrate on the senior credit facility was 6.7% and 6.9% as at September 30,2006 and December 31, 2005, respectively.

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

*Senior Notes*

All of our outstandingsenior notes due 2014 were issued by our subsidiary NTL Cable PLC, on April 13,2004. On July 25, 2006, NTL Cable PLC issued $550 million U.S. dollardenominated 9.125% senior notes due 2016. The note proceeds were used to repaypart of our alternative senior bridge facility.

*Senior CreditFacility*

On March 3, 2006, we repaid £1,358.1 millionin respect of NTL Holdings’ senior credit facility, £1,686.9 million in respectof Telewest’s existing senior credit facilities and £102.0 million in respectof Flextech’s senior credit facility. The NTL and Telewest facilities wererepaid in full utilizing borrowings under our new senior credit facility. TheFlextech facility was repaid using cash on hand.

Our new senior credit facility comprises a termfacility denominated in a combination of pounds sterling, euros and U.S.dollars in an aggregate principal amount of £4.359 billion, $646 million and €498million and a revolving facility of £100 million. As at September 30,2006, the sterling equivalent of £5.0 billion of the term facility had beendrawn and £12 million of the revolving credit facility had been utilized forbank guarantees and standby letters of credit. The facility bears interest atLIBOR, USLIBOR or EURIBOR plus a current margin ranging from 1.75% to 2.75% andthe applicable cost of complying with any reserve requirement. The margins on£3.412 billion of the term loan facilities and on the revolving credit facilityratchet from 1.25% to 2.25% based on leverage ratios. Interest is payable atleast semi-annually. Principal repayments in respect of £3.412 billion of theterm loan facilities are due semi-annually beginning in September 2007 andending on March 3, 2011, and the remaining term loan facilities arerepayable in full on their maturity dates, which range from September 3,2012 through March 3, 2013. We are also required to make principal paymentswhen available cashflows exceed certain thresholds.

The facility is securedthrough a guarantee from NTL Cable PLC. In addition, the bulk of the facilityis secured through guarantees and first priority pledges of the shares andassets of substantially all of the operating subsidiaries of NTL InvestmentHoldings Limited (“NTLIH”) and of receivables arising under any intercompanyloans to those subsidiaries. We are subject to financial maintenance testsunder the facility, including a test of liquidity, coverage and leverage ratiosapplied to us and certain of our subsidiaries.

*Senior BridgeFacilities*

On June 19, 2006, our£1.8 billion bridge facility drawn by one of our subsidiaries, Neptune BridgeBorrower LLC, was repaid in full utilizing drawings on our senior creditfacility totaling £1.2 billion and an alternative senior bridge facility of$1,048.8 million. The alternative senior bridge facility was repaid in twostages utilizing the proceeds from our $550 million 9.125% senior notes due2016 on July 25, 2006, and an additional drawing from our senior creditfacility on August 1, 2006.

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

**Note 6—DerivativeInstruments and Hedging Activities**

Thefair values of our derivative instruments were as follows (in millions):
|                                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                           | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                           | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| *Included within other long-term  assets:*                           |       |                   |       |                  |       |   |   |   |   |
| Foreign currency  forward rate contracts                             |       |                   | £     | —                |       |   |   | £ | 51.3 |   |   |
| *Included within other long-term  assets:*                           |       |                   |       |                  |       |   |   |   |   |
| Interest rate  swaps                                                 |       |                   | £     | 2.9                   |       |   |   | £ | 11.9 |   |   |
| Foreign currency  forward rate contracts                             |       |                   | 9.3        |                  |       |   | — |   |   |
|                                                                 |       |                   | £     | 12.2                  |       |   |   | 11.9 |   |   |
| *Included within other current  liabilities:*                        |       |                   |       |                  |       |   |   |   |   |
| Foreign currency  forward rate contracts                             |       |                   | £     | —                |       |   |   | £ | 5.0 |   |   |
| Interest rate  swaps                                                 |       |                   | 7.7        |                  |       |   | — |   |   |
|                                                                 |       |                   | £     | 7.7                   |       |   |   | £ | 5.0 |   |   |
| *Included within deferred  revenue and other long-term liabilities:* |       |                   |       |                  |       |   |   |   |   |
| Foreign currency  forward rate contracts                             |       |                   | £     | 46.9                  |       |   |   | £ | 16.8 |   |   |
| Interest rate  swaps                                                 |       |                   | 50.8       |                  |       |   | 15.1 |   |   |
|                                                                 |       |                   | £     | 97.7                  |       |   |   | £ | 31.9 |   |   |

 

*Interest Rate Swaps—Hedgingof Interest Rate Sensitive Obligations*

During the quarter we entered into additional interestrate swaps to fix at least two thirds of the interest payments on our debtobligations.

As of September 30, 2006, we had outstandinginterest rate swap agreements to manage the exposure to variability in futurecash flows on the interest payments associated with £3.2 billion of ouroutstanding senior credit facility, which accrues at variable rates based onLIBOR. The interest rate swaps allow us to receive interest based on three andsix month LIBOR in exchange for payments of interest at fixed ratesbetween  4.8% and 6.3%. All of the newinterest rate swaps became effective during the quarter and mature in April 2009.The net settlement of £16.3 million under these interest rate swaps isincluded within interest expense for the nine months ended September 30,2006.

We have designated all ofthese new interest rate swaps as cash flow hedges under FAS 133, becausethey are highly effective hedges against changes in the amount of future cashflows attributable to changes in LIBOR. In the nine months ended September 30,2006, we recorded £7.3 million of unrealized losses in accumulated othercomprehensive income (loss) as a result of the increase in fair market value ofthese interest rate hedges. Certain interest rate swaps entered into under ourprevious financing arrangements are not designated as hedges under FAS 133. Changesin the fair value of these contracts are recognised through gains (losses) onderivative instruments in our Statement of Operations.

*Cross-CurrencyInterest Rate Swaps—Hedging the Interest Payments of Senior Notes and SeniorCredit Facility*

During the quarter we entered into cross-currency swapsto fix the sterling value of interest payments on the U.S. dollar and eurodenominated portions of the senior credit facility and the senior notes due2016.

As of September 30, 2006, we had outstandingcross-currency interest rate swaps with principal amounts of $1,625 millionand €725 million.We currently hedge the interest payments on U.S. dollar and eurodenominated  senior notes due 2014, aswell as interest payments on the U.S. dollar denominated portion of oursenior credit facility, as well as the $550 million senior notes due 2016. Underthese 

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

cross-currencyswaps, we receive interest in U.S. dollars at fixed rates of 8.75% and9.125% and variable rate based on USLIBOR, and in euros at a fixed  rate of 8.75%, in exchange for payments ofinterest in pound sterling at fixed rates ranging from 8.5% to 9.4%, andvariable LIBOR based on the pound sterling equivalent of $1,625 million and €725million. The net settlement of £2.3 million under these cross-currencyinterest rate swaps is included within interest expense for the nine monthsended September 30, 2006.

We have designated thesecross-currency swaps as cash flow hedges under FAS 133 because theyhedge the changes in the pound sterling value of the interest payments on ourU.S. dollar and euro denominated senior notes due 2014 and 2016 and theU.S. dollar and euro denominated portion of our senior credit facility,that result from changes in the U.S. dollar, euro and pound sterlingexchange rates. In the nine months ended September 30, 2006, we recorded£28.4 million of unrealized losses in accumulated other comprehensive income(loss) as a result of the changes in fair market value of these cross-currencyinterest rate swaps.

*Foreign CurrencyForward Rate Contracts—Hedging the Principal Obligations of the U.S. DollarSenior Notes and Senior Credit Facility*

As of September 30, 2006, we had outstandingforeign currency forward rate contracts to purchase $425 million, maturing in April 2009.These contracts hedge changes in the pound sterling value of theU.S. dollar and euro denominated principal obligation of the 8.75% senior notesdue 2014 caused by changes in the U.S. dollar and pound sterling exchange rates.The principal obligations under the $550 million 9.125% senior notes due 2016,and the $646 million and €498 million principalobligations under the senior credit facility are hedged via the aforementionedcross-currency swaps, and are not separate forward rate contracts.

The foreign currency forward rate contracts have notbeen designated as hedges under FAS 133. As such, the contracts arecarried at fair value on our balance sheet with changes in the fair valuerecognised immediately in the income statement. The foreign currency forwardrate contracts do not subject us to material volatility in our earnings andcash flows because changes in the fair value partially mitigate the gains orlosses on the translation of our U.S. dollar and euro denominated debtinto pound sterling, in accordance with FASB Statement No. 52, *Foreign Currency Translation*. Changes infair value of these contracts are reported within foreign exchanges gains(losses).

Net changes in the fair value of the foreign currencyforward rate contracts recognised in gain (loss) from continuing operations forthe three and nine months ended September 30, 2006 and 2005 were asfollows (in millions) (unaudited):
|                                                                           | ** ** | **Three months ended  September 30,** | ** ** | **Nine months  ended  September 30,** | ** ** |
|---------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                | ** ** | **2006**                                             | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net gain (loss) in  fair value of foreign currency forward rate contracts |       | £                                               | 3.2        |                                            | £     | (0.6 | ) | £ | (15.4 | ) | £ | 11.0 |   |
|                                                                           |            |                                                      |            |                                                 |            |  |  |  |  |  |  |  |  |

 

17

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

**Note 7—EmployeeBenefit Plans**

**Thecomponents of net periodic pension cost in the three and nine months ended September 30,2006 and 2005 were asfollows (in millions) (unaudited):**
|                                 | ** ** | **Three months  ended  September 30,** | ** ** | **Nine months  ended  September 30,** | ** ** |
|---------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
|                            |       | **2006**                                         | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service costs                   |       | £                                           | 0.7        |                                            | £     | 0.6 |   | £ | 2.1 |   | £ | 2.3 |   |
| Interest costs                  |       | 3.9                                              |       | 3.6                                             |       | 11.7 |   | 10.9 |   |
| Expected return  on plan assets |       | (4.2                                             | )          | (3.9                                            | )          | (12.6 | ) | (11.2 | ) |
| Settlements and  curtailments   |       | 0.3                                              | ** ** | —**  **                          |       | 0.9 |   | (0.1 | ) |
| Net periodic benefit  costs     |       | £                                           | 0.7        | ** **                                      | £     | 0.3 |   | £ | 2.1 |   | £ | 1.9 |   |

 

*EmployerContributions*

We previously disclosed inour financial statements for the year ended December 31, 2005, that weexpected to contribute £2.2 million to our pension plans in 2006. For thethree and nine months ended September 30, 2006, we contributed £0.5million and £1.5 million respectively, to our pension plans. We anticipatecontributing an additional £0.7 million to fund our pension plans in 2006 for atotal of £2.2 million.

**Note 8—OtherCharges Including Restructuring Charges**

Other charges of £30.9 million for the three monthsended September 30, 2006, relate to our historical restructuring programsand restructuring programs initiated in respect of the reverse acquisition ofTelewest. Liabilities with respect to Telewest property lease exit costs andTelewest involuntary employee termination costs were recognised on the balancesheet of the acquired entity in accordance with EITF 95-3, *“Recognition of Liabilities in Connection with Purchase Combinations”*.Liabilities with respect to NTL property exit costs and involutary employeetermination costs under the restructuring program are recorded in the periodthe liability is incurred or the plan is communicated to employees. As of September 30,2006, we have incurred £45.3 million, and we expect to incur a total ofapproximately £133 million, of costs to fully execute this program.

Thefollowing tables summarize our historical restructuring provisions and therestructuring provisions resulting from the reverse acquisition of Telewest at September 30,2006 (in millions) (unaudited):

| **Historical Restructuring Provisions** | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  December 31, 2005                  |       |       | £     | —                                                          |       |                   | £     | 45.3      |       | £ | 45.3 |   |
| Charged to  expense                               |       |       | —     |                                                            |       | 3.0                    |       | 3.0       |       |
| Utilized                                          |       |       | —     |                                                            |       | (5.7                   | )          | (5.7      | )          |
| Balance,  September 30, 2006                 |       |       | £     | —                                                          |       |                   | £     | 42.6      |       | £ | 42.6 |   |

 

18

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 
| Acquisition Restructuring Provisions                              | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  December 31, 2005                                            |       |       | £     | —                                                          |       |                   | £     | —    |       | £ | — |   |
| Provisions  resulting from business acquisition recognised under  EITF 95-3 |       |       | 34.8       |                                                            |       | 33.2                   |       | 68.0      |       |
| Amendments to  business acquisition related provision                       |       |       | —     |                                                            |       | 12.7                   |       | 12.7      |       |
| Charged to  expense                                                         |       |       | 28.3       |                                                            |       | 20.1                   |       | 48.4      |       |
| Utilized                                                                    |       |       | (43.1      | )                                                               |       | (2.2                   | )          | (45.3     | )          |
| Balance,  September 30, 2006                                           |       |       | £     | 20.0                                                            |       |                   | £     | 63.8      |       | £ | 83.8 |   |

 

**Note 9—Stockholders’Equity and Share Based Compensation**

In connection with the reverse acquisition ofTelewest, each share of NTL Holdings (formerly known as NTL Incorporated)common stock issued and outstanding immediately prior to the effective time ofthe acquisition was converted into the right to receive 2.5 shares of NTLIncorporated new common stock. On March 3, 2006, we issued 212,931,048shares of common stock for this purpose. For accounting purposes, theacquisition of NTL Holdings has been treated as a reverse acquisition.Accordingly, the 212,931,048 shares issued to acquire NTL Holdings have beentreated as outstanding from January 1, 2004 (as adjusted for historicalissuances and repurchases during the period from January 1, 2004 to March 3,2006). In addition, on March 3, 2006, each share of Telewest’s commonstock issued and outstanding immediately prior to the acquisition was convertedinto 0.2875 shares of NTL Incorporated new common stock (and redeemablestock that was redeemed). These 70,728,375 shares of NTL Incorporated newcommon stock have been treated as issued on the acquisition date.

In accordance with the preceding paragraph, theoutstanding shares as of December 31, 2005 and weighted average sharesoutstanding for the nine months ended September 30, 2005 were restated asfollows (in millions):

For the three and nine months ended September 30,2005:
|                                                             | ** ** | **Three  months** | ** ** | **Nine  months** | ** ** |
|-------------------------------------------------------------|------------|-------------------|------------|------------------|------------|
| Weighted average  shares outstanding as previously reported |       |              | 85.1       |             |       |   | 85.6 |   |   |
| Share exchange  ratio in reverse acquisition                |       |              | 2.5        |             |       |   | 2.5 |   |   |
| Weighted average shares  outstanding, as restated           |       |              | 212.8      |             |       |   | 214.0 |   |   |

 

In connection with theacquisition of Virgin Mobile, we issued 34,418,335 shares of common stock. Asat September 30, 2006, we had authorized shares totaling one billion andissued and outstanding shares totaling 326.0 million.

19

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

*Outstanding shares:*
|                                                                                                                               | ** ** | **Number  of shares  (in millions)** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|
| December 31,  2005 outstanding shares as previously reported by NTL Holdings (formerly  known as NTL Incorporated)       |       |                                           | 85.2       |   |   |
| Multiplied by  share exchange ratio in reverse acquisition                                                                    |       |                                           | 2.5        |   |   |
| Shares at  December 31, 2005 (after giving effect to reverse acquisition)                                                |       |                                           | 212.9      |   |   |
| Effect of the  reverse acquisition—conversion of NTL Incorporated (formerly known as  Telewest Global, Inc.) shares |       |                                           | 70.7       |   |   |
| Issued under  Scheme of Arrangement to acquire Virgin Mobile                                                                  |       |                                           | 34.4       |   |   |
| Issuances and  purchases during the period                                                                                    |       |                                           | 8.0        |   |   |
| September 30, 2006  outstanding shares                                                                                   |       |                                           | 326.0      |   |   |

 

On May 18, 2006 and August 28, 2006, weapproved and declared the payment of regular quarterly cash dividends of $0.01and $0.02 per share on June 20, 2006 and September 20, 2006 tostockholders of record as of June 12, 2006 and September 12, 2006totaling £1.6 million and £3.5 million, respectively. Future payments ofregular quarterly dividends by us are at the discretion of the Board ofDirectors and will be subject to our future needs and uses of free cash flow,which could include investments in operations, the repayment of debt, and sharerepurchase programs.

Basic and diluted earnings per share is computed by respectivelydividing the loss from continuing operations, income from discontinuedoperations and the net (loss) income by the weighted average number of sharesoutstanding during the nine months ended September 30, 2006 and 2005.Outstanding warrants and options to purchase 37.4 million shares and 2.4million shares of restricted stock at September 30, 2006 are excluded fromthe calculation of diluted earnings per share, since the inclusion of suchwarrants, options and shares is anti-dilutive. The average number of sharesoutstanding for the nine months ended September 30, 2006 is computed asfollows (in millions):
|                                                  | ** ** | **Number of  Shares** | ** ** |
|--------------------------------------------------|------------|----------------------------|------------|
| Number of shares  outstanding at start of period |       |                       | 212.9      |   |   |
| Issues of common  stock                          |       |                       | 69.6       |   |   |
| Repurchase of  stock                             |       |                       | —     |   |   |
| Weighted average shares  outstanding             |       |                       | 282.5      |   |   |

 

20

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

Thefollowing table summarizes the activity of NTL Incorporated option plans forthe nine months ended September 30, 2006. All values are adjusted for the2.5 conversion of shares on the reverse acquisition of Telewest.
|                                             | ** ** | **Options to  purchase  common stock** | ** ** | **Weighted average  exercise price** | ** ** |
|---------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------|------------|
| Outstanding at  the beginning of the period |       |                                             | 7,756,241  |                                           |       |   | $ | 14.89 |   |   |
| Granted:                                    |       |                                             |       |                                           |       |   |   |   |   |
| As part of the purchase transaction         |       |                                             | 5,193,645  |                                           |       |   | $ | 14.17 |   |   |
| Other                                       |       |                                             | 6,833,709  |                                           |       |   | $ | 21.40 |   |   |
| Exercised                                   |       |                                             | (5,893,829 | )                                              |       |   | $ | 12.80 |   |   |
| Forfeited,  expired or cancelled            |       |                                             | (1,442,364 | )                                              |       |   | $ | 20.00 |   |   |
| Outstanding at  the end of the period       |       |                                             | 12,447,402 |                                           |       |   | $ | 18.55 |   |   |
| Exercisable at  the end of the period       |       |                                             | 4,754,876  |                                           |       |   | $ | 13.35 |   |   |

 

The following tablesummarizes the activity of NTL Incorporated restricted stock plans for the ninemonths ended September 30, 2006. All values are adjusted for the shareexchange ratio of 2.5 on the reverse acquisition of Telewest.

| ** **                                  | ** ** | **Common stock** | ** ** |
|---------------------------------------------|------------|-----------------------|------------|
| Outstanding at  the beginning of the period |       |                  | 75,330     |   |   |
| Granted                                     |       |                  | 2,390,650  |   |   |
| Awards vested and  shares issued            |       |                  | (79,640    | ) |   |
| Forfeited,  expired or cancelled            |       |                  | (8,027     | ) |   |
| Outstanding at the end  of the period       |       |                  | 2,378,313  |   |   |

 

As disclosed in the 2005 Annual Report on Form 10-Kfor NTL Holdings, we adopted Statement of Financial Accounting Standards (SFAS)No. 123 (revised 2004), *Share-Based Payment,*effective January 1, 2006. As a result, we have recorded a cumulativeeffect of a change in accounting principle of £1.2 million to reducecompensation expense recognised in previous periods.

Total share basedcompensation expense included in selling, general and administrative expensesin the Statement of Operations was £27.3 million and £9.8 million for the ninemonths ended September 30, 2006 and 2005, respectively.

21

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

**Note 10—Comprehensive(Loss) Income**

Comprehensive(loss) income comprises (in millions) (unaudited):
|                                               | ** ** | **Three months  ended  September 30,** | ** ** | **Nine months   ended  September 30,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                         | ** ** | **2005**                                              | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net (loss) income  for period                 |       | £                                           | (96.1      | )                                                     | £     | (52.1 | ) | £ | (411.8 | ) | £ | 477.2 |   |
| Currency  translation adjustments             |       | 10.9                                             |       | 7.4                                                   |       | 93.3 |   | 31.3 |   |
| Net unrealized  (losses) gains on derivatives |       | (5.0                                             | )          | 6.5                                                   |       | (12.2 | ) | 12.1 |   |
| Pension liability  adjustment                 |       | —                                           |       | —                                                |       | — |   | 2.1 |   |
| Comprehensive  (loss) income                  |       | £                                           | (90.2      | )                                                     | £     | (38.2 | ) | £ | (330.7 | ) | £ | 522.7 |   |

 

Thecomponents of accumulated other comprehensive income, net of taxes, were asfollows (in millions);
|                                       | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                            | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| Foreign currency  translation         |       |                         | £     | 157.8                       |       |   |   | £ | 64.5 |   |   |
| Pension liability  adjustments        |       |                         | (18.2      | )                           |       |   | (18.2 | ) |   |
| Net unrealized  losses on derivatives |       |                         | (13.0      | )                           |       |   | (0.8 | ) |   |
|                                  |       |                         | £     | 126.6                       |       |   |   | £ | 45.5 |   |   |

 

**Note 11—IncomeTaxes**

At each period end, it isnecessary for us to make certain estimates and assumptions to compute theprovision for income taxes including, but not limited to the expected operatingincome (or loss) for the year, projections of the proportion of income (orloss) earned and taxed in the United Kingdom and the extent to which thisincome (or loss) may also be taxed in the United States, permanent andtemporary differences, the likelihood of deferred tax assets being recoveredand the outcome of contingent tax risks. At each interim period, managementuses the best information available to develop these estimates and assumptions,which are used to compute the forecast effective tax rate for the full yearwhich is applied in computing the income tax expense or benefit for the interimperiod. In accordance with U.S. Generally Accepted Accounting Principles, theimpact of revisions to these estimates are recorded as income tax expense orbenefit in the period in which they become known. Accordingly, the accountingestimates used to compute the provision for income taxes have and will changeas new events occur, as more experience is acquired, as additional informationis obtained and our tax environment changes. To the extent that the estimatechanges during a subsequent quarter the effect of the change on prior quartersas well as on the current quarter is included in income tax expense for thecurrent quarter.

22

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

**Note 12—Commitmentsand Contingent Liabilities**

At September 30,2006, we were committed to pay approximately £421.6 million for equipment,services and licenses. This amount includes approximately £90.6 million foroperations and maintenance contracts and other commitments from October 1,2007 to 2016. The aggregate amount of the fixed and determinable portion ofthese obligations for the succeeding five fiscal years is as follows (inmillions) (unaudited):
| Year ended September 30, |   |   |   |
|-----------------------------------------|--------|--------|--------|
| 2007                                    |   | £ | 331.0  |   |
| 2008                                    |   | 9.8    |   |
| 2009                                    |   | 23.4   |   |
| 2010                                    |   | 8.5    |   |
| 2011                                    |   | 8.5    |   |
| Thereafter                              |   | 40.4   |   |
|                                    |   | £ | 421.6  |   |

 

We are involved in certain disputes and litigationarising in the ordinary course of our business. None of these matters areexpected to have a material adverse effect on our financial position, resultsof operations or cash flows.

Ourbanks have provided guarantees in the form of performance bonds on our behalfas part of our contractual obligations. The fair value of the guarantees hasbeen calculated by reference to the monetary value for each performance bond.The amount of commitment expires over the following periods (in millions)(unaudited):
| Year ended September 30, |   |   |   |
|-----------------------------------------|--------|--------|--------|
| 2007                                    |   | £ | 4.9    |   |
| 2008                                    |   | 2.2    |   |
| 2009                                    |   | 9.8    |   |
| 2010                                    |   | — |   |
| 2011                                    |   | — |   |
| Thereafter                              |   | 8.6    |   |
|                                    |   | £ | 25.5   |   |

 

**Note 13—RecentAccounting Pronouncements**

In May 2005, the Financial Accounting StandardsBoard issued Statement of Financial Accounting Standards (“SFAS”) No. 154,*Accounting Changes and Error Corrections—areplacement of APB Opinion No. 20 and FASB Statement No. 3*.SFAS 154 replaces Accounting Principles Board (“APB”) Opinion No. 20,*Accounting Changes*, and SFAS 3,*Reporting Accounting Changes in Interim FinancialStatements*, and changes the requirements for the accounting for, andreporting of, a change in accounting principle. This statement carries forwardwithout change the guidance contained in Opinion 20 for reporting thecorrection of an error in previously issued financial statements and a changein accounting estimate. SFAS 154 is effective for accounting changes andcorrections of errors in fiscal years beginning after December 31, 2005.Early adoption is permitted for accounting changes and corrections of errorsmade in fiscal years beginning after the date SFAS 154 is issued. The adoptionof SFAS 154 did not have a material impact on our consolidated financialstatements.

In July 2006, theFASB issued FASB Interpretation (“FIN”) No. 48, *Accountingfor Uncertainty in Income Taxes—an interpretation of FASB Statement 109*.FIN 48 prescribes a comprehensive model for 

23

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**NTL INCORPORATED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

recognizing,measuring, presenting and disclosing in the financial statements tax positionstaken or expected to be taken on a tax return, including a decision whether tofile or not to file in a particular jurisdiction. FIN 48 is effective forfiscal years beginning after December 15, 2006. If there are changes innet assets as a result of application of FIN 48 these will be accounted for asan adjustment to retained earnings. We are currently assessing the impact ofFIN 48 on our consolidated financial position and results of operations.

**Note 14—SegmentInformation**

Our reportable segments are based on our method ofinternal reporting. Our primary business segment is our Cable segment, whichconsists of our television, broadband and telephony business. We also operate aContent segment through our wholly-owned subsidiaries Flextech Limited (“Flextech’’)and sit-up Limited (“sit-up”), which supply TV programming to the UKpay-television broadcasting market including our televised shopping unit sit-upTV, which markets and retails a wide variety of consumer products using anauction-based format. We also operate a Mobile segment through our wholly-ownedsubsidiary Virgin Mobile Limited, which consists of our mobile telephonybusiness. Our segments operate entirely in the United Kingdom and no onecustomer represents more than 5% of our overall revenue.

Segment operating income before depreciation,amortization and other charges, which we refer to as Segment OCF, is management’smeasure of segment profit as permitted under SFAS 131, *“Disclosuresabout Segments of an Enterprise and Related Information”.* Ourmanagement, including our chief executive officer who is our chief operatingdecision maker, considers Segment OCF as an important indicator of theoperational strength and performance of our segments. Segment OCF excludes theimpact of costs and expenses that do not directly affect our cash flows. Othercharges, including restructuring charges, are also excluded from Segment OCF asmanagement believes they are not characteristic of our underlying businessoperations.

Segmentinformation for the three and nine month periods ended September 30, 2006is as follows (in millions) (unaudited):
|                                               | ** ** | **Three months ended September 30, 2006** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                    | ** ** | **Cable**                                                          | ** ** | **Content** | ** ** | **Mobile** | ** ** | **Elims.** | ** ** | **Total** | ** ** |
| Revenue                                       |       | £                                                             | 805.1      |   |   | £ | 79.4 |   |   | £ | 140.4 |   |   | £ | — |   |   | £ | 1,024.9 |   |
| Inter segment  revenue                        |       | 0.9                                                                |       |   | 5.9 |   |   | — |   |   | (6.8 | ) |   | — |   |
| Operating costs                               |       | (295.5                                                             | )          |   | (56.2 | ) |   | (94.2 | ) |   | 5.9 |   |   | (440.0 | ) |
| Selling, general  and administrative expenses |       | (214.2                                                             | )          |   | (23.6 | ) |   | (30.2 | ) |   | 0.9 |   |   | (267.1 | ) |
| Segment OCF                                   |       | 296.3                                                              |       |   | 5.5 |   |   | 16.0 |   |   | — |   |   | 317.8 |   |
| Depreciation,  amortization and other charges |       | (306.9                                                             | )          |   | (0.2 | ) |   | (20.3 | ) |   | — |   |   | (327.4 | ) |
| Operating (loss)  income                      |       | £                                                             | (10.6      | ) |   | £ | 5.3 |   |   | £ | (4.3 | ) |   | £ | — |   |   | £ | (9.6 | ) |
| Identifiable assets                           |       | £                                                             | 9,379.9    |   |   | £ | 793.0 |   |   | £ | 1,020.0 |   |   | £ | — |   |   | £ | 11,192.9 |   |

24

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

 
|                                               | ** ** | **Nine months ended September 30, 2006** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                    | ** ** | **Cable**                                                         | ** ** | **Content** | ** ** | **Mobile** | ** ** | **Elims.** | ** ** | **Total** | ** ** |
| Revenue                                       |       | £                                                            | 2,194.1    |   | £ | 186.1 |   | £ | 140.4 |   | £ | — |   | £ | 2,520.6 |   |
| Inter segment  revenue                        |       | 1.6                                                               |       | 13.4 |   | — |   | (15.0 | ) | — |   |
| Operating costs                               |       | (852.0                                                            | )          | (129.6 | ) | (94.2 | ) | 13.4 |   | (1,062.4 | ) |
| Selling, general  and administrative expenses |       | (567.5                                                            | )          | (52.6 | ) | (30.2 | ) | 1.6 |   | (648.7 | ) |
| Segment OCF                                   |       | 776.2                                                             |       | 17.3 |   | 16.0 |   | — |   | 809.5 |   |
| Depreciation,  amortization and other charges |       | (780.2                                                            | )          | (8.4 | ) | (20.3 | ) | — |   | (808.9 | ) |
| Operating (loss)  income                      |       | £                                                            | (4.0       | ) | £ | 8.9 |   | £ | (4.3 | ) | £ | — |   | £ | 0.6 |   |
| Identifiable assets                           |       | £                                                            | 9,379.9    |   | £ | 793.0 |   | £ | 1,020.0 |   | £ | — |   | £ | 11,192.9 |   |

 

In 2005, we did not haveany operations in the Content or Mobile segments and all of our operationsrelated to the Cable segment. Included in identifiable assets is £1,249.3million, £105.6 million and £918.2 million of goodwill from the acquisitions ofTelewest and Virgin Mobile that has been preliminarily allocated to the Cable,Content and Mobile segments, respectively. We expect to finalize thisallocation upon completion of our purchase price allocations.

**Note 15—CondensedConsolidated Financial Information**

On April 13, 2004, our wholly-owned subsidiary,NTL Cable PLC, or NTL Cable, issued £375 million aggregate principal amount of9.75% senior notes due 2014, $425 million aggregate principal amount of 8.75%senior notes due 2014, €225 million aggregateprincipal amount of 8.75% senior notes due 2014 and $100 million aggregateprincipal amount of floating rate notes due 2012, together referred to as the seniornotes due 2014. On July 15, 2005, the $100 million principal amount of thefloating rate notes was redeemed. On July 25, 2006, NTL Cable issued $550million aggregate principal amount of 9.125% senior notes due 2016. NTLIncorporated,  NTL:Telewest LLC, NTL (UK)Group, Inc. and NTL Communications Limited, have guaranteed the senior notesdue 2014 and 2016 on a senior basis. NTLIH has guaranteed the senior notes due2014 and 2016 on a senior subordinated basis.

We present the following condensed consolidatedfinancial information as of September 30, 2006 and December 31, 2005and for the three and nine months ended September 30, 2006 and September 30,2005 as required by Article 3-10(d) of Regulation S-X.

25

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**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

 

| ** **                                                     | ** ** | ** ** | ** ** | **September  30, 2006** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|-------------------------|------------|
| Balance sheets                                            | ** ** | ** ** | ** ** | **Company**             | ** ** | **NTL  Cable** | ** ** | **Other  guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                     | ** ** | ** ** | ** ** | **(in  millions)**      | ** ** |
| Cash and cash equivalents                                      |       | £     | 2.2        |                    | £     | — |   | £ | 35.5 |   | £ | 2.0 |   |   | £ | 262.5 |   |   |   | £ | — |   |   | £ | 302.2 |   |
| Restricted cash                                                |       | —     |       | —                  |       | — |   | — |   |   | 6.7 |   |   |   | — |   |   | 6.7 |   |
| Programming inventory                                          |       | —     |       | —                  |       | — |   | — |   |   | 55.5 |   |   |   | — |   |   | 55.5 |   |
| Other current assets                                           |       | 1.1        |       | —                  |       | (14.4 | ) | — |   |   | 529.8 |   |   |   | — |   |   | 516.5 |   |
| Total current assets                                           |       | 3.3        |       | —                  |       | 21.1 |   | 2.0 |   |   | 854.5 |   |   |   | — |   |   | 880.9 |   |
| Fixed assets, net                                              |       | —     |       | —                  |       | — |   | — |   |   | 6,088.6 |   |   |   | — |   |   | 6,088.6 |   |
| Intangible assets, net                                         |       | —     |       | —                  |       | (11.1 | ) | — |   |   | 3,673.1 |   |   |   | — |   |   | 3,662.0 |   |
| Equity investments                                             |       | —     |       | —                  |       | — |   | — |   |   | 387.5 |   |   |   | — |   |   | 387.5 |   |
| Investments in, and loans to, parent and subsidiary  companies |       | 3,354.2    |       | 1,647.9                 |       | (869.8 | ) | 9,638.1 |   |   | (5,573.9 | ) |   |   | (8,196.5 | ) |   | — |   |
| Other assets, net                                              |       | —     |       | —                  |       | — |   | 88.5 |   |   | 85.4 |   |   |   | — |   |   | 173.9 |   |
| Total assets                                                   |       | £     | 3,357.5    |                    | £     | 1,647.9 |   | £ | (859.8 | ) | £ | 9,728.6 |   |   | £ | 5,515.2 |   |   |   | £ | (8,196.5 | ) |   | £ | 11,192.9 |   |
| Current liabilities                                            |       | £     | 8.9        |                    | £     | 40.8 |   | £ | (181.8 | ) | £ | 652.6 |   |   | £ | 506.9 |   |   |   | £ | 489.3 |   |   | £ | 1,516.7 |   |
| Long-term debt                                                 |       | —     |       | 1,121.6                 |       | 533.5 |   | 5,527.2 |   |   | 5,483.0 |   |   |   | (6,609.8 | ) |   | 6,055.5 |   |
| Other long-term liabilities                                    |       | —     |       | —                  |       | 85.6 |   | 84.1 |   |   | 101.4 |   |   |   | — |   |   | 271.1 |   |
| Minority interest                                              |       | —     |       | —                  |       | — |   | — |   |   | 1.0 |   |   |   | — |   |   | 1.0 |   |
| Shareholders’ equity (deficit)                            |       | 3,348.6    |       | 485.5                   |       | (1,297.1 | ) | 3,464.7 |   |   | (577.1 | ) |   |   | (2,076.0 | ) |   | 3,348.6 |   |
| Total liabilities  and shareholders’ equity               |       | £     | 3,357.5    |                    | £     | 1,647.9 |   | £ | (859.8 | ) | £ | 9,728.6 |   |   | £ | 5,515.2 |   |   |   | £ | (8,196.5 | ) |   | £ | 11,192.9 |   |

 

| ** **                                                     | ** ** | ** **         | ** ** | **December  31, 2005** | ** ** |
|----------------------------------------------------------------|------------|--------------------|------------|------------------------|------------|
| Balance sheets                                            | ** ** | ** **         | ** ** | **Company**            | ** ** | **NTL  Cable** | ** ** | **Other  guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                     | ** ** | **(in  millions)** |
| Cash and cash equivalents                                      |       | £             | 446.6      |                   | £     | — |   |   | £ | — |   |   | £ | 5.4 |   |   | £ | 283.2 |   |   |   | £ | — |   |   | £ | 735.2 |   |
| Restricted cash                                                |       | —             |       | —                 |       |   | — |   |   | — |   |   | 3.4 |   |   |   | — |   |   | 3.4 |   |
| Marketable securities                                          |       | 96.9               |       | —                 |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | 96.9 |   |
| Other current assets                                           |       | 68.1               |       | —                 |       |   | 0.3 |   |   | — |   |   | 235.8 |   |   |   | — |   |   | 304.2 |   |
| Total current assets                                           |       | 611.6              |       | —                 |       |   | 0.3 |   |   | 5.4 |   |   | 522.4 |   |   |   | — |   |   | 1,139.7 |   |
| Fixed assets, net                                              |       | —             |       | —                 |       |   | — |   |   | — |   |   | 3,294.9 |   |   |   | — |   |   | 3,294.9 |   |
| Intangible assets, net                                         |       | —             |       | —                 |       |   | (14.4 | ) |   | — |   |   | 457.4 |   |   |   | — |   |   | 443.0 |   |
| Investments in, and loans to, parent and subsidiary  companies |       | 1,375.0            |       | 1,638.6                |       |   | 1,340.4 |   |   | 3,836.0 |   |   | 680.5 |   |   |   | (8,870.5 | ) |   | — |   |
| Other assets, net                                              |       | —             |       | —                 |       |   | — |   |   | 69.0 |   |   | 41.9 |   |   |   | — |   |   | 110.9 |   |
| Total assets                                                   |       | £             | 1,986.6    |                   | £     | 1,638.6 |   |   | £ | 1,326.3 |   |   | £ | 3,910.4 |   |   | £ | 4,997.1 |   |   |   | £ | (8,870.5 | ) |   | £ | 4,988.5 |   |
| Current liabilities                                            |       | £             | 21.6       |                   | £     | 18.9 |   |   | £ | — |   |   | £ | 69.7 |   |   | £ | 622.0 |   |   |   | £ | (122.4 | ) |   | £ | 609.8 |   |
| Long-term debt                                                 |       | 10.0               |       | 869.1                  |       |   | — |   |   | 3,055.2 |   |   | 4,666.3 |   |   |   | (6,321.4 | ) |   | 2,279.2 |   |
| Other long-term liabilities                                    |       | —             |       | —                 |       |   | 17.8 |   |   | 31.8 |   |   | 93.9 |   |   |   | — |   |   | 143.5 |   |
| Minority interest                                              |       | —             |       | —                 |       |   | — |   |   | — |   |   | 1.0 |   |   |   | — |   |   | 1.0 |   |
| Shareholders’ equity (deficit)                            |       | 1,955.0            |       | 750.6                  |       |   | 1,308.5 |   |   | 753.7 |   |   | (386.1 | ) |   |   | (2,426.7 | ) |   | 1,955.0 |   |
| Total liabilities  and shareholders’ equity               |       | £             | 1,986.6    |                   | £     | 1,638.6 |   |   | £ | 1,326.3 |   |   | £ | 3,910.4 |   |   | £ | 4,997.1 |   |   |   | £ | (8,870.5 | ) |   | £ | 4,988.5 |   |

 

26

----

**NTL INCORPORATED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

| ** **                                   | ** ** | **Three months ended September 30, 2006** | ** ** |
|----------------------------------------------|------------|--------------------------------------------------------------------|------------|
| Statements of operations           | ** ** | ** **                                                         | ** ** | **Company** | ** ** | **NTL  Cable** | ** ** | **Other  guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                   | ** ** | **(in millions)**                                             | ** ** |
| Revenue                                      |       |                                                               | £     | — |   |   | £ | — |   |   | £ | — |   |   | £ | — |   |   | £ | 1,024.9 |   |   |   | £ | — |   |   | £ | 1,024.9 |   |
| Operating costs                              |       |                                                               | —     |   |   | — |   |   | — |   |   | — |   |   | (440.0 | ) |   |   | — |   |   | (440.0 | ) |
| Selling, general and administrative expenses |       |                                                               | (5.9       | ) |   | — |   |   | (3.2 | ) |   | — |   |   | (258.0 | ) |   |   | — |   |   | (267.1 | ) |
| Other charges                                |       |                                                               | —     |   |   | — |   |   | — |   |   | — |   |   | (30.9 | ) |   |   | — |   |   | (30.9 | ) |
| Depreciation and amortization                |       |                                                               | —     |   |   | — |   |   | — |   |   | — |   |   | (296.5 | ) |   |   | — |   |   | (296.5 | ) |
| Operating loss                               |       |                                                               | (5.9       | ) |   | — |   |   | (3.2 | ) |   | — |   |   | (0.5 | ) |   |   | — |   |   | (9.6 | ) |
| Interest and other income, net               |       |                                                               | 0.3        |   |   | 28.7 |   |   | 10.3 |   |   | 37.3 |   |   | — |   |   |   | (69.5 | ) |   | 7.1 |   |
| Interest expense                             |       |                                                               | —     |   |   | (28.4 | ) |   | (1.9 | ) |   | (86.3 | ) |   | (66.1 | ) |   |   | 69.5 |   |   | (113.2 | ) |
| Loss on extinguishment of debt               |       |                                                               | —     |   |   | — |   |   | — |   |   | (0.4 | ) |   | (0.1 | ) |   |   | — |   |   | (0.5 | ) |
| Share of income from equity investments      |       |                                                               | —     |   |   | — |   |   | — |   |   | — |   |   | 3.9 |   |   |   | — |   |   | 3.9 |   |
| Foreign currency (losses) gains              |       |                                                               | —     |   |   | (8.1 | ) |   | 2.0 |   |   | 35.5 |   |   | (23.1 | ) |   |   | — |   |   | 6.3 |   |
| Gain on derivative instruments               |       |                                                               | —     |   |   | — |   |   | — |   |   | 1.6 |   |   | — |   |   |   | — |   |   | 1.6 |   |
| Minority interest                            |       |                                                               | —     |   |   | — |   |   | — |   |   | — |   |   | (0.7 | ) |   |   | — |   |   | (0.7 | ) |
| Effect of change in accounting principle     |       |                                                               | (0.1       | ) |   | — |   |   | — |   |   | — |   |   | 0.1 |   |   |   | — |   |   | — |   |
| Income tax benefit                           |       |                                                               | —     |   |   | — |   |   | 0.3 |   |   | — |   |   | 0.6 |   |   |   | — |   |   | 0.9 |   |
| (Loss) income from continuing operations     |       |                                                               | (5.7       | ) |   | (7.8 | ) |   | 7.5 |   |   | (12.3 | ) |   | (85.9 | ) |   |   | — |   |   | (104.2 | ) |
| Income from discontinued operations          |       |                                                               | —     |   |   | — |   |   | 8.1 |   |   | — |   |   | — |   |   |   | — |   |   | 8.1 |   |
| Equity in net loss of subsidiaries           |       |                                                               | (90.4      | ) |   | (87.7 | ) |   | (97.1 | ) |   | (75.4 | ) |   | — |   |   |   | 350.6 |   |   | — |   |
| Net loss                                     |       |                                                               | £     | (96.1 | ) |   | £ | (95.5 | ) |   | £ | (81.5 | ) |   | £ | (87.7 | ) |   | £ | (85.9 | ) |   |   | £ | 350.6 |   |   | £ | (96.1 | ) |
|                                              |            |                                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                   | ** **   | ** ** | ** ** | **Nine  months ended September 30, 2006** | ** **   |
|----------------------------------------------|--------------|------------|------------|-------------------------------------------|--------------|
| Statements of operations           | ** **   | ** ** | ** ** | ** **                                | ** **   | **Company** | ** ** | **NTL  Cable** | ** ** | **Other  guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                   | ** **   | ** ** | ** ** | **(in  millions)**                        | ** **   |
| Revenue                                      |         |       | £     | —                                    |         |   | £ | — |   |   | £ | — |   |   | £ | — |   |   | £ | 2,520.6 |   |   |   | £ | — |   |   | £ | 2,520.6 |   |
| Operating costs                              |    |       | —     |                                      |    | — |    |   | — |   |    | — |    |   | (1,062.4 | ) |    |   | — |   |   | (1,062.4 | ) |
| Selling, general and administrative expenses |         |       | (18.5      | )                                         |         | — |   |   | (9.7 | ) |   | — |   |   | (620.5 | ) |   |   | — |   |   | (648.7 | ) |
| Other charges                                |         |       | —     |                                      |         | — |   |   | — |   |   | — |   |   | (51.4 | ) |   |   | — |   |   | (51.4 | ) |
| Depreciation and amortization                |         |       | —     |                                      |         | — |   |   | — |   |   | — |   |   | (757.5 | ) |   |   | — |   |   | (757.5 | ) |
| Operating (loss) income                      |         |       | (18.5      | )                                         |         | — |   |   | (9.7 | ) |   | — |   |   | 28.8 |   |   |   | — |   |   | 0.6 |   |
| Interest and other income, net               |         |       | 0.3        |                                      |         | 69.4 |   |   | 23.6 |   |   | 150.2 |   |   | — |   |   |   | (219.2 | ) |   | 24.3 |   |
| Interest expense                             |         |       | —     |                                      |         | (68.4 | ) |   | (80.6 | ) |   | (194.6 | ) |   | (208.2 | ) |   |   | 219.2 |   |   | (332.6 | ) |
| Loss on extinguishment of debt               |         |       | —     |                                      |         | — |   |   | — |   |   | (0.4 | ) |   | (32.5 | ) |   |   | — |   |   | (32.9 | ) |
| Share of income from equity investments      |         |       | —     |                                      |         | — |   |   | — |   |   | — |   |   | 8.4 |   |   |   | — |   |   | 8.4 |   |
| Foreign currency (losses) gains              |         |       | —     |                                      |         | (5.7 | ) |   | (101.7 | ) |   | — |   |   | 9.6 |   |   |   | — |   |   | (97.8 | ) |
| Losses on derivative instruments             |         |       | —     |                                      |         | — |   |   | — |   |   | (1.9 | ) |   | — |   |   |   | — |   |   | (1.9 | ) |
| Effect of change in accounting principle     |         |       | 0.7        |                                      |         | — |   |   | — |   |   | — |   |   | 0.5 |   |   |   | — |   |   | 1.2 |   |
| Income tax benefit                           |         |       |       |                                      |         | — |   |   | 9.2 |   |   | — |   |   | 1.6 |   |   |   | — |   |   | 10.8 |   |
| (Loss) income from continuing operations     |         |       | (17.5      | )                                         |         | (4.7 | ) |   | (159.2 | ) |   | (46.7 | ) |   | (191.8 | ) |   |   | — |   |   | (419.9 | ) |
| Income from discontinued operations          |         |       | —     |                                      |         | — |   |   | 8.1 |   |   | — |   |   | — |   |   |   | — |   |   | 8.1 |   |
| Equity in net loss of subsidiaries           |         |       | (394.3     | )                                         |         | (240.8 | ) |   | (235.5 | ) |   | (194.1 | ) |   | — |   |   |   | 1,064.7 |   |   | — |   |
| Net loss                                     |         |       | £     | (411.8                                    | )            |   | £ | (245.5 | ) |   | £ | (386.6 | ) |   | £ | (240.8 | ) |   | £ | (191.8 | ) |   |   | £ | 1,064.7 |   |   | £ | (411.8 | ) |
|                                              |              |            |            |                                           |              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

27

----

**NTL INCORPORATED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

 

| ** **                                   | ** ** | ** ** | ** ** | **Three  months ended September 30, 2005** | ** ** |
|----------------------------------------------|------------|------------|------------|--------------------------------------------|------------|
| Statements of operations           | ** ** | ** ** | ** ** | **Company**                                | ** ** | **NTL  Cable** | ** ** | **Other  guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                   | ** ** | ** ** | ** ** | **(in  millions)**                         | ** ** |
| Revenue                                      |       |       | £     | —                                     |       |   | £ | — |   |   | £ | — |   |   | £ | — |   |   | £ | 482.7 |   |   |   | £ | — |   |   | £ | 482.7 |   |
| Operating costs                              |       |       | —     |                                       |       | — |   |   | — |   |   | — |   |   | (200.2 | ) |   |   | — |   |   | (200.2 | ) |
| Selling, general and administrative expenses |       |       | (3.8       | )                                          |       | — |   |   | — |   |   | — |   |   | (112.4 | ) |   |   | — |   |   | (116.2 | ) |
| Other charges                                |       |       | —     |                                       |       | — |   |   | — |   |   | — |   |   | (1.3 | ) |   |   | — |   |   | (1.3 | ) |
| Depreciation and amortization                |       |       | —     |                                       |       | — |   |   | — |   |   | — |   |   | (169.7 | ) |   |   | — |   |   | (169.7 | ) |
| Operating loss                               |       |       | (3.8       | )                                          |       | — |   |   | — |   |   | — |   |   | (0.9 | ) |   |   | — |   |   | (4.7 | ) |
| Interest and other income, net               |       |       | 4.7        |                                       |       | 19.4 |   |   | 4.3 |   |   | 75.7 |   |   | 1.1 |   |   |   | (98.4 | ) |   | 6.8 |   |
| Interest expense                             |       |       | (0.2       | )                                          |       | (19.3 | ) |   | — |   |   | (61.0 | ) |   | (69.6 | ) |   |   | 98.4 |   |   | (51.7 | ) |
| Loss on extinguishment of debt               |       |       | —     |                                       |       | (2.0 | ) |   | — |   |   | — |   |   | — |   |   |   | — |   |   | (2.0 | ) |
| Share of loss from equity investments        |       |       | —     |                                       |       | — |   |   | — |   |   | — |   |   | (0.2 | ) |   |   | — |   |   | (0.2 | ) |
| Foreign currency (losses) gains              |       |       | (2.2       | )                                          |       | — |   |   | — |   |   | (13.7 | ) |   | 2.8 |   |   |   | — |   |   | (13.1 | ) |
| Minority interest                            |       |       | —     |                                       |       | — |   |   | — |   |   | — |   |   | (1.0 | ) |   |   | — |   |   | (1.0 | ) |
| Income tax benefit                           |       |       | —     |                                       |       | — |   |   | 12.4 |   |   | — |   |   | — |   |   |   | — |   |   | 12.4 |   |
| (Loss) income from  continuing operations    |       |       | (1.5       | )                                          |       | (1.9 | ) |   | 16.7 |   |   | 1.0 |   |   | (67.8 | ) |   |   | — |   |   | (53.5 | ) |
| (Loss) income from discontinued operations   |       |       | —     |                                       |       | — |   |   | (8.4 | ) |   | — |   |   | 9.8 |   |   |   | — |   |   | 1.4 |   |
| Equity in net loss of subsidiaries           |       |       | (50.6      | )                                          |       | (65.4 | ) |   | (75.9 | ) |   | (66.4 | ) |   | — |   |   |   | 258.3 |   |   | — |   |
| Net loss                                     |       |       | £     | (52.1                                      | )          |   | £ | (67.3 | ) |   | £ | (67.6 | ) |   | £ | (65.4 | ) |   | £ | (58.0 | ) |   |   | £ | 258.3 |   |   | £ | (52.1 | ) |

 

| ** **                                    | ** ** | **Nine  months ended September 30, 2005** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------|------------|
| Statements of operations            | ** ** | ** **                                | ** ** | **Company** | ** ** | **NTL  Cable** | ** ** | **Other   guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                    | ** ** | **(in  millions)**                        | ** ** |
| Revenue                                       |       |                                      | £     | — |   |   | £ | — |   |   | £ | — |   |   | £ | — |   |   | £ | 1,463.0 |   |   |   | £ | — |   |   | £ | 1,463.0 |   |
| Operating costs                               |       |                                      | —     |   |   | — |   |   | — |   |   | — |   |   | (603.1 | ) |   |   | — |   |   | (603.1 | ) |
| Selling, general and  administrative expenses |       |                                      | (11.2      | ) |   | — |   |   | — |   |   | — |   |   | (347.1 | ) |   |   | — |   |   | (358.3 | ) |
| Other charges                                 |       |                                      | —     |   |   | — |   |   | — |   |   | — |   |   | (2.4 | ) |   |   | — |   |   | (2.4 | ) |
| Depreciation and  amortization                |       |                                      | —     |   |   | — |   |   | — |   |   | — |   |   | (484.5 | ) |   |   | — |   |   | (484.5 | ) |
| Operating (loss) income                       |       |                                      | (11.2      | ) |   | — |   |   | — |   |   | — |   |   | 25.9 |   |   |   | — |   |   | 14.7 |   |
| Interest and other income,  net               |       |                                      | 12.0       |   |   | 65.3 |   |   | 21.2 |   |   | 228.0 |   |   | 8.3 |   |   |   | (313.2 | ) |   | 21.6 |   |
| Interest expense                              |       |                                      | (0.4       | ) |   | (65.8 | ) |   | (0.1 | ) |   | (212.1 | ) |   | (215.0 | ) |   |   | 313.2 |   |   | (180.2 | ) |
| Loss on extinguishment of  debt               |       |                                      | —     |   |   | (2.0 | ) |   | — |   |   | — |   |   | — |   |   |   | — |   |   | (2.0 | ) |
| Foreign currency (losses)  gains              |       |                                      | (9.8       | ) |   | — |   |   | — |   |   | (52.4 | ) |   | 32.3 |   |   |   | — |   |   | (29.9 | ) |
| Minority interest expense                     |       |                                      | —     |   |   | — |   |   | — |   |   | — |   |   | (1.0 | ) |   |   | — |   |   | (1.0 | ) |
| Income tax benefit  (expense)                 |       |                                      | 1.1        |   |   | — |   |   | (9.8 | ) |   | — |   |   | — |   |   |   | — |   |   | (8.7 | ) |
| (Loss) income from  continuing operations     |       |                                      | (8.3       | ) |   | (2.5 | ) |   | 11.3 |   |   | (36.5 | ) |   | (149.5 | ) |   |   | — |   |   | (185.5 | ) |
| (Loss) income from  discontinued operations   |       |                                      | —     |   |   | — |   |   | (8.4 | ) |   | — |   |   | 671.1 |   |   |   | — |   |   | 662.7 |   |
| Equity in net income of  subsidiaries         |       |                                      | 485.5      |   |   | 475.9 |   |   | 475.4 |   |   | 512.4 |   |   | — |   |   |   | (1,949.2 | ) |   | — |   |
| Net income                                    |       |                                      | £     | 477.2 |   |   | £ | 473.4 |   |   | £ | 478.3 |   |   | £ | 475.9 |   |   | £ | 521.6 |   |   |   | £ | (1,949.2 | ) |   | £ | 477.2 |   |
|                                               |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

28

----

**NTL INCORPORATED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

| ** **                                                   | ** ** | ** **     | ** ** | **Nine  months ended September 30, 2006** | **  ** |
|--------------------------------------------------------------|------------|----------------|------------|-------------------------------------------|------------------|
| Statements of cash flows                      | ** ** | ** **     | ** ** | **Company**                               | ** **       | **NTL  Cable** | ** ** | **Other  guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                   | ** ** | **(millions)** | ** ** |
| Net cash (used in) provided  by operating activities         |       |           | £     | (14.4                                     | )                |   | £ | (9.3 | ) | £ | 13.7 |   | £ | (22.2 | ) |   | £ | 544.4 |   |   |   | £ | — |   |   | £ | 512.2 |   |
| Investing  activities:                                       |       |           |       |                                      |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchases of fixed assets                                    |       |           | —     |                                      |             | — |   | — |   | — |   |   | (397.0 | ) |   |   | — |   |   | (397.0 | ) |
| Payments in relation to  Telewest acquisition                |       |           | —     |                                      |             | — |   | (2,024.2 | ) | — |   |   | — |   |   |   | — |   |   | (2,024.2 | ) |
| Payments in relation to  Virgin Mobile acquisition           |       |           | —     |                                      |             | — |   | (423.5 | ) | — |   |   | — |   |   |   | — |   |   | (423.5 | ) |
| Telewest reorganization                                      |       |           | —     |                                      |             | — |   | (2,420.6 | ) | (4,220.6 | ) |   | 2,420.6 |   |   |   | 4,220.6 |   |   | — |   |
| Investments in and loans to  parent and subsidiary companies |       |           | (13.5      | )                                         |             | (294.7 | ) | (1,640.1 | ) | 2,288.1 |   |   | (2,753.1 | ) |   |   | 2,420.6 |   |   | 7.3 |   |
| Proceeds from sale of  assets                                |       |           | —     |                                      |             | — |   | — |   | — |   |   | 0.9 |   |   |   | — |   |   | 0.9 |   |
| Decrease in restricted cash                                  |       |           | —     |                                      |             | — |   | — |   | — |   |   | 5.1 |   |   |   | — |   |   | 5.1 |   |
| Net cash used in investing  activities                       |       |           | (13.5      | )                                         |             | (294.7 | ) | (6,508.4 | ) | (1,932.5 | ) |   | (723.5 | ) |   |   | 6,641.2 |   |   | (2,831.4 | ) |
| Financing  activities:                                       |       |           |       |                                      |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                               |       |           | (5.1       | )                                         |             | — |   | — |   | — |   |   | — |   |   |   | — |   |   | (5.1 | ) |
| Proceeds from new  borrowings                                |       |           | —     |                                      |             | 871.2 |   | 1,800.0 |   | 4,658.8 |   |   | 1,716.1 |   |   |   | — |   |   | 9,046.1 |   |
| Financing fees                                               |       |           | —     |                                      |             | — |   | (24.9 | ) | (68.1 | ) |   | (29.2 | ) |   |   | — |   |   | (122.2 | ) |
| Issuance of stock                                            |       |           | —     |                                      |             | — |   | 4,220.6 |   | 2,420.6 |   |   | — |   |   |   | (6,641.2 | ) |   | — |   |
| Proceeds from employee  stock options                        |       |           | 35.2       |                                      |             | — |   | — |   | — |   |   | — |   |   |   | — |   |   | 35.2 |   |
| Share redemption                                             |       |           | —     |                                      |             | — |   | 1,800.0 |   | (2,350.8 | ) |   | 550.8 |   |   |   | — |   |   | — |   |
| Principal payments                                           |       |           | —     |                                      |             | (567.2 | ) | (1,709.0 | ) | (2,709.2 | ) |   | (2,079.3 | ) |   |   | — |   |   | (7,064.7 | ) |
| Net cash provided by  financing activities                   |       |           | 30.1       |                                      |             | 304.0 |   | 6,086.7 |   | 1,951.3 |   |   | 158.4 |   |   |   | (6,641.2 | ) |   | 1,889.3 |   |
| Effect of exchange rate  changes                             |       |           | —     |                                      |             | — |   | (3.1 | ) | — |   |   | — |   |   |   | — |   |   | (3.1 | ) |
| Increase (decrease) in cash  and cash equivalents            |       |           | 2.2        |                                      |             | — |   | (411.1 | ) | (3.4 | ) |   | (20.7 | ) |   |   | — |   |   | (433.0 | ) |
| Cash and cash equivalents  at start of period                |       |           | —     |                                      |             | — |   | 446.6 |   | 5.4 |   |   | 283.2 |   |   |   | — |   |   | 735.2 |   |
| Cash and cash equivalents  at end of period                  |       |           | £     | 2.2                                       |             |   | £ | — |   | £ | 35.5 |   | £ | 2.0 |   |   | £ | 262.5 |   |   |   | £ | — |   |   | £ | 302.2 |   |

 

29

----

**NTL INCORPORATED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**(Continued)**

 

 

| ** **                                           | ** ** | ** **     | ** ** | **Nine  months ended September 30, 2005** | ** ** |
|------------------------------------------------------|------------|----------------|------------|-------------------------------------------|------------|
| Statements of cash flows              | ** ** | ** **     | ** ** | **Company**                               | ** ** | **NTL  Cable** | ** ** | **Other  guarantors** | ** ** | **NTLIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                           | ** ** | **(millions)** | ** ** |
| Net cash (used in) provided  by operating activities |       |           | £     | (90.0                                     | )          |   | £ | 24.2 |   |   | £ | 60.3 |   |   | £ | (48.1 | ) |   | £ | 293.2 |   |   |   | £ | — |   |   | £ | 239.6 |   |
| Investing  activities:                               |       |           |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchases of fixed assets                            |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | (216.3 | ) |   |   | — |   |   | (216.3 | ) |
| Repayments from (advances  to) affiliates            |       |           | 56.2       |                                      |       | 494.2 |   |   | 519.7 |   |   | 537.2 |   |   | (797.1 | ) |   |   | (810.2 | ) |   | — |   |
| Proceeds from sale of  assets                        |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | 2.6 |   |   |   | — |   |   | 2.6 |   |
| Dividends received                                   |       |           | 523.8      |                                      |       | — |   |   | — |   |   | — |   |   | — |   |   |   | (523.8 | ) |   | — |   |
| Decrease in restricted cash                          |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | 12.2 |   |   |   | — |   |   | 12.2 |   |
| Proceeds from sale of Broadcast  operations, net     |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | 1,229.0 |   |   |   | — |   |   | 1,229.0 |   |
| Proceeds from sale of  Ireland operations, net       |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | 216.2 |   |   |   | — |   |   | 216.2 |   |
| Net cash provided by  investing activities           |       |           | 580.0      |                                      |       | 494.2 |   |   | 519.7 |   |   | 537.2 |   |   | 446.6 |   |   |   | (1,334.0 | ) |   | 1,243.7 |   |
| Financing  activities:                               |       |           |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                       |       |           | —     |                                      |       | — |   |   | (523.8 | ) |   | — |   |   | — |   |   |   | 523.8 |   |   | — |   |
| Proceeds from new  borrowings                        |       |           | 10.0       |                                      |       | 58.9 |   |   | — |   |   | 739.7 |   |   | — |   |   |   | (808.6 | ) |   | — |   |
| Proceeds from employee  stock options                |       |           | 4.8        |                                      |       | — |   |   | — |   |   | — |   |   | — |   |   |   | — |   |   | 4.8 |   |
| Purchase of stock                                    |       |           | (114.0     | )                                         |       | — |   |   | — |   |   | — |   |   | — |   |   |   | — |   |   | (114.0 | ) |
| Principal payments                                   |       |           | —     |                                      |       | (578.4 | ) |   | (56.2 | ) |   | (1,228.7 | ) |   | (537.8 | ) |   |   | 1,618.8 |   |   | (782.3 | ) |
| Net cash (used in)  financing activities             |       |           | (99.2      | )                                         |       | (519.5 | ) |   | (580.0 | ) |   | (489.0 | ) |   | (537.8 | ) |   |   | 1,334.0 |   |   | (891.5 | ) |
| Cash  flow from discontinued operations:             |       |           |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used by operating  activities               |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | (14.3 | ) |   |   | — |   |   | (14.3 | ) |
| Net cash used by investing  activities               |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | (4.1 | ) |   |   | — |   |   | (4.1 | ) |
|                                                 |       |           | —     |                                      |       | — |   |   | — |   |   | — |   |   | (18.4 | ) |   |   | — |   |   | (18.4 | ) |
| Effect of exchange rate  changes                     |       |           | 14.2       |                                      |       | — |   |   | — |   |   | — |   |   | — |   |   |   | — |   |   | 14.2 |   |
| Increase (decrease) in cash  and cash equivalents    |       |           | 405.0      |                                      |       | (1.1 | ) |   | — |   |   | 0.1 |   |   | 183.6 |   |   |   | — |   |   | 587.6 |   |
| Cash and cash equivalents  at start of period        |       |           | 38.2       |                                      |       | 1.1 |   |   | — |   |   | — |   |   | 85.9 |   |   |   | — |   |   | 125.2 |   |
| Cash and cash equivalents at end of period           |       |           | £     | 443.2                                     |       |   | £ | — |   |   | £ | — |   |   | £ | 0.1 |   |   | £ | 269.5 |   |   |   | £ | — |   |   | £ | 712.8 |   |
|                                                      |            |                |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

30

----

**NTL INVESTMENTHOLDINGS LIMITED**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(in millions)**
|                                                                                                                                                                  | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                       | ** ** | **(Unaudited)**              | ** ** | **(See Note)**         | ** ** |
| **Assets**                                                                                                                                                       |       |                         |       |                        |       |   |   |   |   |
| Current assets                                                                                                                                                   |       |                         |       |                        |       |   |   |   |   |
| Cash  and cash equivalents                                                                                                                                       |       |                         | £     | 262.7                       |       |   |   | £ | 288.1 |   |   |
| Restricted  cash                                                                                                                                                 |       |                         | 5.9        |                        |       |   | 2.6 |   |   |
| Accounts  receivable—trade, less allowances for doubtful accounts of £56.5(2006) and  £39.8 (2005)                                                |       |                         | 403.0      |                        |       |   | 178.2 |   |   |
| Inventory  for re-sale                                                                                                                                           |       |                         | 12.1       |                        |       |   | — |   |   |
| Programming  inventory                                                                                                                                           |       |                         | 55.5       |                        |       |   | — |   |   |
| Prepaid  expenses and other current assets                                                                                                                       |       |                         | 75.4       |                        |       |   | 42.2 |   |   |
| Total  current assets                                                                                                                                            |       |                         | 814.6      |                        |       |   | 511.1 |   |   |
| Fixed  assets, net                                                                                                                                               |       |                         | 5,916.9    |                        |       |   | 3,114.3 |   |   |
| Goodwill                                                                                                                                                         |       |                         | 2,273.1    |                        |       |   | — |   |   |
| Reorganization  value in excess of amounts allocable to identifiable assets                                                                                      |       |                         | 197.9      |                        |       |   | 197.9 |   |   |
| Customer  lists, net                                                                                                                                             |       |                         | 1,117.4    |                        |       |   | 229.8 |   |   |
| Other  intangible assets, net                                                                                                                                    |       |                         | 66.5       |                        |       |   | 2.4 |   |   |
| Equity  investments                                                                                                                                              |       |                         | 387.5      |                        |       |   | — |   |   |
| Due  from parent and subsidiary companies                                                                                                                        |       |                         | 716.9      |                        |       |   | 61.0 |   |   |
| Other  assets, net of accumulated amortization of £11.3 (2006) and £32.2 (2005)                                          |       |                         | 173.9      |                        |       |   | 110.9 |   |   |
| **Total  assets**                                                                                                                                                |       |                         | £     | 11,664.7                    |       |   |   | £ | 4,227.4 |   |   |
| **Liabilities and shareholders’  equity**                                                                                                                   |       |                         |       |                        |       |   |   |   |   |
| Current liabilities                                                                                                                                              |       |                         |       |                        |       |   |   |   |   |
| Accounts  payable                                                                                                                                                |       |                         | £     | 369.8                       |       |   |   | £ | 176.7 |   |   |
| Accrued  expenses and other current liabilities                                                                                                                  |       |                         | 623.0      |                        |       |   | 266.7 |   |   |
| Interest  payable                                                                                                                                                |       |                         | 133.3      |                        |       |   | 65.2 |   |   |
| Deferred  revenue                                                                                                                                                |       |                         | 256.7      |                        |       |   | 95.3 |   |   |
| Due  to parent and subsidiary companies                                                                                                                          |       |                         | —     |                        |       |   | 111.8 |   |   |
| Current  portion of long-term debt                                                                                                                               |       |                         | 151.5      |                        |       |   | 0.8 |   |   |
| Total  current liabilities                                                                                                                                       |       |                         | 1,534.3    |                        |       |   | 716.5 |   |   |
| Long-term  debt, net of current portion                                                                                                                          |       |                         | 6,400.5    |                        |       |   | 2,630.4 |   |   |
| Deferred  revenue and other long-term liabilities                                                                                                                |       |                         | 264.2      |                        |       |   | 125.8 |   |   |
| Total liabilities                                                                                                                                                |       |                         | 8,199.0    |                        |       |   | 3,472.7 |   |   |
| Commitments and contingent  liabilities                                                                                                                          |       |                         |       |                        |       |   |   |   |   |
| Minority  interest                                                                                                                                               |       |                         | 1.0        |                        |       |   | 1.0 |   |   |
| Shareholders’ equity                                                                                                                                        |       |                         |       |                        |       |   |   |   |   |
| Share  capital—£0.001 par value; authorized 1,000,000 ordinary shares (2006 and  2005); issued and outstanding 121,006 (2006 and 2005) ordinary shares |       |                         | —     |                        |       |   | — |   |   |
| Additional  paid-in capital                                                                                                                                      |       |                         | 4,371.3    |                        |       |   | 1,399.9 |   |   |
| Accumulated  other comprehensive loss                                                                                                                            |       |                         | (38.6      | )                           |       |   | (19.0 | ) |   |
| Accumulated  deficit                                                                                                                                             |       |                         | (868.0     | )                           |       |   | (627.2 | ) |   |
| Total  shareholders’ equity                                                                                                                                 |       |                         | 3,464.7    |                        |       |   | 753.7 |   |   |
| **Total liabilities and  shareholders’ equity**                                                                                                             |       |                         | £     | 11,664.7                    |       |   |   | £ | 4,227.4 |   |   |

----

Note:   Thebalance sheet at December 31, 2005 has been derived from the auditedfinancial statements at that date.

See accompanying notes.

31

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**NTL INVESTMENTHOLDINGS LIMITED**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited) (inmillions)**
|                                                                                                                                           | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                                | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Revenue**                                                                                                                               |       | £                                               | 993.9      |                                                | £     | 452.6 |   | £ | 1,947.0 |   | £ | 1,371.2 |   |
| **Costs and expenses**                                                                                                                    |       |                                                 |       |                                                |       |   |   |   |   |
| Operating costs (exclusive of depreciation shown  separately below)                                                                       |       | (427.9                                               | )          | (188.3                                              | )          | (828.4 | ) | (568.3 | ) |
| Selling, general and administrative expenses                                                                                              |       | (249.1                                               | )          | (103.8                                              | )          | (487.5 | ) | (320.8 | ) |
| Other charges                                                                                                                             |       | (28.2                                                | )          | (1.2                                                | )          | (47.7 | ) | (2.3 | ) |
| Depreciation                                                                                                                              |       | (217.2                                               | )          | (136.0                                              | )          | (463.0 | ) | (383.3 | ) |
| Amortization                                                                                                                              |       | (72.0                                                | )          | (25.5                                               | )          | (125.7 | ) | (76.7 | ) |
|                                                                                                                                      |       | (994.4                                               | )          | (454.8                                              | )          | (1,952.3 | ) | (1,351.4 | ) |
| **Operating  (loss) income**                                                                                                              |       | (0.5                                                 | )          | (2.2                                                | )          | (5.3 | ) | 19.8 |   |
| **Other income (expense)**                                                                                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Interest income and other, net                                                                                                            |       | 3.9                                                  |       | 3.1                                                 |       | 14.5 |   | 10.7 |   |
| Interest expense                                                                                                                          |       | (117.7                                               | )          | (55.9                                               | )          | (235.4 | ) | (197.9 | ) |
| Foreign currency transaction gains (losses)                                                                                               |       | 12.4                                                 |       | (10.9                                               | )          | 5.4 |   | (20.1 | ) |
| Loss on extinguishment of debt                                                                                                            |       | (0.5                                                 | )          | —                                              |       | (32.9 | ) | — |   |
| Gains on derivative instruments                                                                                                           |       | 5.6                                                  |       | —                                              |       | 2.1 |   | — |   |
| **Loss  from continuing operations before income taxes, minority interest and  cumulative effect of change in accounting principle** |       | (96.8                                                | )          | (65.9                                               | )          | (251.6 | ) | (187.5 | ) |
| Income tax  benefit                                                                                                                       |       | 1.6                                                  |       | —                                              |       | 1.6 |   | — |   |
| Minority interest                                                                                                                         |       | (0.6                                                 | )          | (1.0                                                | )          | (0.1 | ) | (1.0 | ) |
| Cumulative effect  of change in accounting principle                                                                                      |       | —                                               |       | —                                              |       | 1.2 |   | — |   |
| Loss from continuing operations                                                                                                           |       | (95.8                                                | )          | (66.9                                               | )          | (248.9 | ) | (188.5 | ) |
| **Discontinued operations**                                                                                                               |       |                                                 |       |                                                |       |   |   |   |   |
| Income from  discontinued operations before income taxes                                                                                  |       | —                                               |       | —                                              |       | — |   | 5.5 |   |
| Gain on disposal  of assets                                                                                                               |       | 8.1                                                  |       | 1.5                                                 |       | 8.1 |   | 659.1 |   |
| Income tax  expense                                                                                                                       |       | —                                               |       | —                                              |       | — |   | (0.2 | ) |
| **Income from discontinued operations**                                                                                                   |       | —                                               |       | 1.5                                                 |       | 8.1 |   | 664.4 |   |
| **Net  (loss) income**                                                                                                                    |       | £                                               | (87.7      | )                                                   | £     | (65.4 | ) | £ | (240.8 | ) | £ | 475.9 |   |

 

See accompanying notes.

32

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**NTL INVESTMENTHOLDINGS LIMITED**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited) (inmillions)**
|                                                               | ** ** | **Nine months ended  September 30,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                    | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| **Net cash  provided by operating activities**                |       | £                                              | 568.4      |   | £ | 233.9 |   |
| **Investing activities**                                      |       |                                                |       |   |   |
| Purchase of fixed assets                                      |       | (345.1                                              | )          | (213.4 | ) |
| Acquisition of Telewest UK Limited from parent                |       | (3,966.7                                            | )          | — |   |
| Acquisition of Virgin Mobile                                  |       | (423.5                                              | )          | — |   |
| Investments in and loans to parent and subsidiary  companies  |       | 1,208.9                                             |       | (59.8 | ) |
| Decrease in restricted cash                                   |       | 1.0                                                 |       | 12.3 |   |
| Proceeds from sale of fixed assets                            |       | 2.1                                                 |       | 2.9 |   |
| Proceeds from sale of Broadcast operations, net               |       | —                                              |       | 1,227.8 |   |
| Proceeds from sale of Ireland operations, net                 |       | —                                              |       | 216.2 |   |
| Net cash provided by investing activities                     |       | (3,523.3                                            | )          | 1,186.0 |   |
| **Financing activities**                                      |       |                                                |       |   |   |
| Principal payments on long-term debt                          |       | (2,996.5                                            | )          | (1,217.8 | ) |
| New borrowings                                                |       | 3,549.4                                             |       | — |   |
| Issuance of shares                                            |       | 2,420.6                                             |       | — |   |
| Financing fees                                                |       | (44.0                                               | )          | — |   |
| Net cash provided by (used in) financing activities           |       | 2,929.5                                             |       | (1,217.8 | ) |
| **Cash flow from discontinued  operations**                   |       |                                                |       |   |   |
| Net cash used by  operating activities                        |       | —                                              |       | (14.3 | ) |
| Net cash used by  investing activities                        |       | —                                              |       | (4.1 | ) |
| Net cash used in discontinued operations                      |       | —                                              |       | (18.4 | ) |
| Effect of  exchange rate changes on cash and cash equivalents |       | —                                              |       | — |   |
| (Decrease) increase  in cash and cash equivalents             |       | (25.4                                               | )          | 183.7 |   |
| Cash and cash  equivalents, beginning of period               |       | 288.1                                               |       | 85.5 |   |
| Cash and cash  equivalents, end of period                     |       | £                                              | 262.7      |   | £ | 269.2 |   |

 

See accompanying notes.

33

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**Note 1—Basisof Presentation**

We are an indirect, wholly-owned subsidiary ofNTL Incorporated (“NTL”).

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with U.S. GenerallyAccepted Accounting Principles for interim financial information and with the rules andregulations of the Securities and Exchange Commission. Accordingly, they do notinclude all of the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financial statements. Inthe opinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included.Operating results for the nine months ended September 30, 2006 are notnecessarily indicative of the results that may be expected for the year ending December 31,2006. For further information, refer to the consolidated financial statementsand footnotes thereto included in the Annual Report on Form 10-K forNTL Holdings Inc. (formerly known as NTL Incorporated, or NTL Holdings) for theyear ended December 31, 2005.

Certain prior periodbalances have been reclassified to conform to the current period presentation.

**Note 2—SignificantAccounting Policies**

*Revenue Recognition*

We recognise revenueonly when it is realized or realizable and earned. We recognise revenue whenall of the following are present:

·       persuasiveevidence of an arrangement exists between us and our customers;

·       deliveryhas occurred or the services have been rendered;

·       theprice for the service is fixed or determinable; and

·       collectibilityis reasonably assured.

*Telephone,cable television and internet revenues* are recognisedas the services are provided to customers.

*Installationrevenues* are recognised in accordance with theprovisions of FASB Statement No. 51, *Financial Reporting byCable Television Companies,* in relation to connection and activationfees for cable television, as well as telephone and internet services, on thebasis that we market and maintain a unified fiber network through which weprovide all of these services. Installation revenues are recognised at the timethe installation has been completed to the extent that those fees are less thandirect selling costs. Installation fees in excess of direct selling costs aredeferred and amortized over the expected life of the customer’s connection.

*Rentalrevenue* in respect of line rentals and rental ofequipment provided to customers is recognised on a straight-line basis over theterm of the rental agreement.

*Mobilehandset and other equipment revenue***is recognised when the goods have been delivered and titlehas passed.

*Mobileservice revenues* include airtime, data, roaming andlong-distance revenues and are invoiced and recorded as part of a periodicbilling cycle. Service revenues are recognised as the services are 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

provided. At the end ofeach period, adjustments are recorded to defer revenue relating to servicesbilled in advance and to accrue for earned but unbilled services.

Contract and non-contract post-pay customers arebilled in arrears based on usage and revenue is recognised when the service isrendered and collectibility is reasonably assured. Revenue from non-contractpre-pay customers is recorded as deferred revenue prior to commencement ofservices and is recognised as the services are rendered or usage expires.

*Bundledservices revenue* are recognised in accordance with theprovisions of EITF No 00-21, *Accounting for revenuearrangements with multiple deliverables,* to assess whether thecomponents of the bundled services should be recognised separately.

For bundled packages thathave separately identifiable components, the total consideration is allocatedto the different components based on their relative fair values. Where the fairvalue of a delivered component cannot be determined reliably but the fair valueof the undelivered component can be, the fair value of the undeliveredcomponent is deducted from the total consideration and the net amount isallocated to the delivered components based on the “residual value” method.

*SubscriberAcquisition Costs*

Costs incurred in respectto the acquisition of customers of our Mobile segment, including payments todistributors and the cost of handset promotions, are expensed as incurred.

**Note 3—Acquisitionsand Disposals**

*Acquisition ofVirgin Mobile*

On July 4, 2006, NTL and we acquired 100% of theoutstanding shares and options of Virgin Mobile Holdings (UK) plc (“VirginMobile”) through a U.K. Scheme of Arrangement. Virgin Mobile is the largestmobile virtual network operator in the United Kingdom, with approximately 4.5million customers.

The total purchase price of approximately£952.2 million includes cash of approximately £418.2 million, commonstock valued at £518.8 million and estimated direct transaction costs of£15.2 million. The average market price per share of common stock utilizedin determining the value of new common stock issued of £15.07 ($26.59) is basedon an average of the closing prices of NTL common stock divided by the Telewestacquisition conversion ratio of 2.5 times for a range of trading days (January 12,January 13, January 17, January 18, January 19) around theannouncement date of the proposed acquisition (January 16, 2006).

We financed the cash portion of the offer andtransactional expenses through £475 million of additional borrowings under oursenior credit facility and cash on hand.

On May 24, 2006, we received approval by amajority of the shareholders of Virgin Mobile, other than those associated withaffiliates of the Virgin Group, to enter into a trademark license agreementwith Virgin Enterprises Limited under which we are entitled to use certainVirgin trademarks within the United Kingdom and Ireland. The agreement wasentered into on the same date and is an exclusive license covering a number ofaspects of our consumer business, including the provision of communicationsservices (such as internet, television, fixed line telephony, and upon theacquisition of Virgin Mobile, mobile telephony), the acquisition and brandingof sports, movie and other premium television content, 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

and the branding and saleof certain communications equipment related to our consumer businesses, such asset top boxes and cable modems. The agreement provides for a royalty of 0.25%per annum of our revenue from the relevant businesses, subject to a minimumannual royalty of £8.5 million (the royalty would have been approximately£9 million based on combined historical NTL and Telewest 2005 revenuesincluding revenue from Virgin Mobile and our subsidiary Virgin.net). Theagreement replaces the existing license agreement under which our subsidiaryVirgin.net was entitled to use the Virgin brand in relation to its internet business.The agreement has a term of 30 years. It can be terminated after 10 years onone year’s notice, and it is subject to earlier termination by us in certainother circumstances, including (subject to specified payments) upon a change ofcontrol. The agreement also entitles us to use a corporate name that includesthe Virgin name. We expect to commence the proposed re-branding of our consumeroperations in early 2007 and the re-branding is expected to include a change inthe name of the corporate parent.

Thetotal purchase price of approximately £952.2 million has been allocated asfollows (in millions) (unaudited):

| ** **                                            | ** ** | **Acquisition  Date** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|
| Cash and cash  equivalents, including restricted cash |       |                  | £     | 10.0 |   |   |
| Accounts  receivable                                  |       |                  | 45.4       |   |   |
| Prepaid expenses  and other current assets            |       |                  | 24.6       |   |   |
| Fixed assets                                          |       |                  | 18.5       |   |   |
| Inventory                                             |       |                  | 9.1        |   |   |
| Amortizable  intangible assets:                       |       |                  |       |   |   |
| Customer lists                                        |       |                  | 280.0      |   |   |
| Contractual relationships                             |       |                  | 6.0        |   |   |
| Intangible assets  with indefinite lives:             |       |                  |       |   |   |
| Goodwill                                              |       |                  | 918.2      |   |   |
| Other assets, net                                     |       |                  | 1.4        |   |   |
| Accounts payable                                      |       |                  | (47.2      | ) |   |
| Long-term debt,  including current portion            |       |                  | (200.0     | ) |   |
| Other current  liabilities                            |       |                  | (111.2     | ) |   |
| Other long-term  liabilities                          |       |                  | (2.6       | ) |   |
| Total purchase price                                  |       |                  | £     | 952.2 |   |   |

 

The allocation of thepurchase price to assets acquired and liabilities assumed is preliminary,pending finalization of valuations performed by third party experts,finalization of management’s integration plan pertaining to the acquiredbusiness, completion of analysis of deferred tax balances and completion of areview of certain other historical matters.

*Amortizableintangible assets*

Of the total purchase price, approximately £286.0million has been allocated to amortizable intangible assets including customerlists and contractual relationships. Customer lists represent existingcontracts that relate primarily to underlying customer relationships pertainingto the services provided by Virgin Mobile. The fair value of these assets wasdetermined utilizing the income approach. We expect to 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

amortize the fair value ofthese assets on a straight-line basis over weighted average estimated usefullives of four years.

Contractual relationshipsrepresent the fair value of certain contracts with distributors of our productsand services.  The fair value of thesecontracts was determined utilizing the income approach. We expect to amortizethe fair value of these assets on a straight-line basis over the remaining lifeof the contracts of approximately three years.

*Reverse Acquisitionof Telewest*

On March 3, 2006, NTL Holdings merged with asubsidiary of NTL Incorporated (formerly known as Telewest Global, Inc.)which we refer to as NTL and the merger has been accounted for as a reverseacquisition of Telewest Global, Inc. or Telewest using the purchasemethod. This merger created the UK’s largest provider of residentialbroadband and the UK’s leading provider of triple play services. In connectionwith this transaction, Telewest changed its name to NTL Incorporated.

On June 19, 2006, inconnection with the integration of NTL and Telewest, we engaged in a postacquisition restructuring of Telewest UK Limited and its subsidiaries in orderto integrate their operations with NTL’s existing U.K. operations and toimplement permanent financing. This restructuring involved a series of stepsthat included internal contributions, distributions, mergers and acquisitionsas well as borrowings from external sources and contributions of the proceedsof the same to NTL Investment Holdings Limited, or NTLIH, to effect itsacquisition of the shares of Telewest UK Limited and its subsidiaries. Thecompletion of this restructuring resulted in Telewest UK Limited and itssubsidiaries becoming a wholly-owned subsidiary of NTLIH. We have accounted forthe acquisition of Telewest UK Limited and its subsidiaries by applying theprinciples of APB 16 in respect to transactions between entities undercommon control. As a result, the assets acquired and liabilities assumed havebeen recognised at their historical cost and the results of operations andcashflows for Telewest UK Limited are included in the consolidated financialstatements from June 19, 2006, the date the restructuring was completed.

*Disposal ofBroadcast and Ireland operations*

On December 1, 2004, NTL Holdings reached anagreement for the sale of its Broadcast operations. The sale completed on January 31,2005. The Broadcast operations are accounted for as a discontinued operationand therefore, Broadcast’s results of operations have been removed from ourresults of continuing operations for the nine months ended September 30,2005. The results of operations of Broadcast have been excluded from thecomponents of “Loss from continuing operations” and shown under the caption “Incomefrom discontinued operations before income taxes” in the Statements ofOperations. Upon the sale, we recorded a gain on disposal of£518.8 million.

On May 9, 2005, NTL Holdings sold its operationsin the Republic of Ireland, comprising all of the ordinary shares of ntlCommunications (Ireland) Limited and ntl Irish Networks Limited and certainadditional assets, to MS Irish Cable Holdings B.V., an affiliate of MorganStanley & Co. International Limited, for an aggregate purchase priceof €333.4 million,or £225.5 million. The Ireland operations are accounted for as adiscontinued operation and therefore, Ireland’s results of operations have beenremoved from the results of continuing operations for the nine months ended September 30,2005. The results of operations of Ireland have been excluded from thecomponents of “Loss from continuing operations” and shown under the caption “Incomefrom discontinued operations before income taxes” in 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

the Statements ofOperations. Upon the sale, we recorded a gain on disposal of £137.0 million,net of tax of £8.5 million. During the three months ended September 30,2006, we were able to release certain contingent tax liabilities of £8.1million relating to the disposal of our former Ireland operations.

As a result of the sale ofNTL Holdings’ Broadcast and Ireland operations, we have accounted for theBroadcast and Ireland operations as discontinued operations in 2005. Revenuefrom the Broadcast operations reported in discontinued operations for the threeand nine months ended September 30, 2005 was £nil and £21.4 million,respectively. Pre-tax income from Broadcast operations, reported as pre-tax(loss) income from discontinued operations, for the three and nine months endedSeptember 30, 2005, was £nil and £3.0 million, respectively. Revenue fromthe Ireland operations reported in discontinued operations for the three andnine months ended September 30, 2005 was £nil and £25.6 million,respectively. Pre-tax income from Ireland operations, reported as pre-taxincome from discontinued operations, for the three and nine months ended September 30,2005 was £nil and £2.5 million, respectively.

**Note 4—Goodwilland Intangible Assets**

Goodwilland intangible assets consist of (in millions):

| ** **                                                                       | ** ** | **Estimated  Useful Life** | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                       | ** ** | ** **                      | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| Goodwill and  intangible assets not subject to amortization:                     |       |                            |       |                         |       |                        |       |   |   |   |   |
| Goodwill                                                                         |       |                            |       |                         | £     | 2,273.1                     |       |   |   |         — |   |   |
| Reorganization  value in excess of amounts allocable to identifiable assets |       |                            |       |                         | £     | 197.9                       |       |   |   | £ | 197.9 |   |   |
| Trade names                                                                      |       |                            |       |                         | 17.9       |                        |       |   | — |   |   |
|                                                                             |       |                            |       |                         | £     | 215.8                       |       |   |   | £ | 197.9 |   |   |
| Intangible assets  subject to amortization:                                      |       |                            |       |                         |       |                        |       |   |   |   |   |
| Costs                                                                            |       |                            |       |                         |       |                        |       |   |   |   |   |
| Contractual relationships                                                        |       | 2 – 3 years                |       |                         | £     | 6.0                         |       |   |   | — |   |   |
| Trade names and licenses                                                         |       | 1 – 9 years                |       |                         | 50.7       |                        |       |   | 3.2 |   |   |
| Customer lists                                                                   |       | 4 – 8 years                |       |                         | 1,560.2    |                        |       |   | 519.4 |   |   |
|                                                                             |       |                            |       |                         | £     | 1,616.9                     |       |   |   | £ | 522.6 |   |   |
| Accumulated amortization                                                         |       |                            |       |                         |       |                        |       |   |   |   |   |
| Contractual relationships                                                        |       |                            |       |                         | £     | 0.5                         |       |   |   | — |   |   |
| Trade names and licenses                                                         |       |                            |       |                         | 7.6        |                        |       |   | 0.8 |   |   |
| Customer lists                                                                   |       |                            |       |                         | 442.8      |                        |       |   | 289.6 |   |   |
|                                                                             |       |                            |       |                         | 450.9      |                        |       |   | 290.4 |   |   |
|                                                                             |       |                            |       |                         | £     | 1,166.0                     |       |   |   | £ | 232.2 |   |   |

 

Estimated aggregateamortization expense for each of the five succeeding fiscal years from December 31,2005 is as follows: £242.0 million in 2006, £298.4 million in 2007, £232.7million in 2008, £202.1 million in 2009 and £160.1 in 2010.

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

**Note 5—Long-TermDebt**

Long-termdebt consists of (in millions):

| ** **                                               | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                               | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| 8.75% US Dollar  Senior Notes due 2014 of NTL Cable PLC  |       |                         | £     | 227.1                       |       |   |   | £ | 247.3 |   |   |
| 9.75% Sterling  Senior Notes due 2014 of NTL Cable PLC   |       |                         | 375.0      |                        |       |   | 375.0 |   |   |
| 8.75% Euro Senior  Notes due 2014 of NTL Cable PLC       |       |                         | 152.5      |                        |       |   | 155.0 |   |   |
| 9.125% US Dollar  Senior Notes due 2016                  |       |                         | 293.9      |                        |       |   | — |   |   |
| Senior Credit  Facility                                  |       |                         | 5,042.0    |                        |       |   | 1,463.0 |   |   |
| Floating Rate  Loan Note due 2012 to NTL Cable PLC       |       |                         | 53.4       |                        |       |   | 58.2 |   |   |
| Other loan notes  due to parent and subsidiary companies |       |                         | 291.6      |                        |       |   | 293.0 |   |   |
| Capital leases                                           |       |                         | 110.7      |                        |       |   | 38.2 |   |   |
| Other                                                    |       |                         | 5.8        |                        |       |   | 1.5 |   |   |
|                                                     |       |                         | 6,552.0    |                        |       |   | 2,631.2 |   |   |
| Less: current  portion                                   |       |                         | (151.5     | )                           |       |   | (0.8 | ) |   |
|                                                     |       |                         | £     | 6,400.5                     |       |   |   | £ | 2,630.4 |   |   |

 

Theeffective interest rates on the variable interest rate debt were as follows:

| ** **                        | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                        | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| Floating Rate  Loan Note due 2012 |       |                         | 10.5       | %                           |       |   | 8.3 | % |   |
| Senior credit facility            |       |                         | 6.7        | %                           |       |   | 6.9 | % |   |

 

*Senior Notes*

Our parent, NTL Cable PLC,issued senior notes due 2014 on April 13, 2004. On July 25, 2006, NTLCable PLC issued $550 million U.S. dollar denominated 9.125% senior notes due2016 to repay in part an alternative senior bridge facility whose proceeds hadbeen loaned to us for the acquisition of Telewest UK Limited. All senior noteshave been guaranteed by us pursuant to a senior subordinated guarantee.

*Senior CreditFacility*

On March 3, 2006, we repaid £1,358.1 millionin respect of our senior credit facility, £1,686.9 million in respect ofTelewest’s existing senior credit facilities and £102.0 million in respect ofFlextech’s senior credit facility. The NTL and Telewest facilities were repaidin full utilizing borrowings under our new senior credit facility. The Flextechfacility was repaid from cash on hand.

Our new senior credit facility comprises a termfacility denominated in a combination of pounds sterling, euros and U.S.dollars in an aggregate principal amount of £4.359 billion, $646 million and €498million and a revolving facility of £100 million. As at September 30,2006, the sterling equivalent of £5.0 billion of the term facility hadbeen drawn and £12 million of the revolving credit facility had been utilizedfor bank guarantees and standby letters of credit. The facility bears interestat LIBOR, USLIBOR or EURIBOR plus a current margin ranging from 1.75% to 2.75%and the applicable cost of complying 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

with any reserverequirement. The margins on £3.412 billion of the term loan facilities and onthe revolving credit facility ratchet from 1.25% to 2.25% based on leverageratios. Interest is payable at least semi-annually. Principal repayments inrespect of £3.412 billion of the term loan facilities are due semi-annuallybeginning in September 2007 and ending on March 3, 2011, and theremaining term loan facilities are repayable in full on their maturity dates,which range from September 3, 2012 through March 3, 2013. We are alsorequired to make principal payments when available cashflows exceed certainthresholds.

The facility is securedthrough a guarantee from NTL Cable PLC. In addition, the bulk of the facility issecured through guarantees and first priority pledges of the shares and assetsof substantially all of our operating subsidiaries and of receivables arisingunder any intercompany loans to those subsidiaries. We are subject to financialmaintenance tests under the facility, including a test of liquidity, coverageand leverage ratios applied to us and certain of our subsidiaries.

*Senior BridgeFacilities*

On June 19, 2006, our£1.8 billion bridge facility drawn by one of our subsidiaries, Neptune BridgeBorrower LLC, was repaid in full utilizing drawings on our senior creditfacility totaling £1.2 billion and an alternative senior bridge facility of$1,048.8 million. The alternative senior bridge facility was repaid in twostages utilizing the proceeds from our $550 million 9.125% senior notes due2016 on July 25, 2006, and an additional drawing from our senior creditfacility on August 1, 2006.

**Note 6—DerivativeInstruments and Hedging Activities**

Thefair values of our derivative instruments were as follows (in millions):
|                                                                      | ** ** | **September 30,** | ** **                   | **December 31,** | ** ** |
|----------------------------------------------------------------------|------------|------------------------|------------------------------|-----------------------|------------|
| ** **                                                           | ** ** | **2006**               | ** **                   | **2005**              | ** ** |
| ** **                                                           | ** ** | **(unaudited)**        | ** **                   | ** **            | ** ** |
| *Included within other long-term  assets:*                           |       |                   |                         |                  |       |   |   |   |   |
| Foreign currency forward rate contracts                              |       |                   | £                       | —                |       |   |   | £ | 51.3 |   |   |
| *Included within other long-term  assets:*                           |       |                   |                         |                  |       |   |   |   |   |
| Interest rate  swaps                                                 |       |                   | £                       | 2.9                   |       |   |   | £ | 11.9 |   |   |
| Foreign currency  forward rate contracts                             |       |                   |      9.3 |                  |       |   |       — |   |   |
|                                                                 |       |                   | £                       | 12.2                  |       |   |   | £ | 11.9 |   |   |
| *Included within other current  liabilities:*                        |       |                   |                         |                  |       |   |   |   |   |
| Foreign currency  forward rate contracts                             |       |                   | £                       | —                |       |   |   | £ | 5.0 |   |   |
| Interest rate swaps                                                  |       |                   | 7.7                          |                  |       |   | — |   |   |
|                                                                 |       |                   | £                       | 7.7                   |       |   |   | £ | 5.0 |   |   |
| *Included within deferred  revenue and other long-term liabilities:* |       |                   |                         |                  |       |   |   |   |   |
| Foreign currency  forward rate contracts                             |       |                   | £                       | 46.9                  |       |   |   | £ | 16.8 |   |   |
| Interest rate  swaps                                                 |       |                   | 50.8                         |                  |       |   |   15.1 |   |   |
|                                                                 |       |                   | £97.7                   |                  |       |   | £ | 31.9 |   |   |

 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

*Interest Rate Swaps—Hedgingof Interest Rate Sensitive Obligations*

During the quarter we entered into additional interestrate swaps to fix at least two thirds of the interest payments on our debtobligations.

As of September 30, 2006, we had outstandinginterest rate swap agreements to manage the exposure to variability in futurecash flows on the interest payments associated with £3.2 billion of ouroutstanding senior credit facility, which accrues at variable rates based onLIBOR. The interest rate swaps allow us to receive interest based on three andsix month LIBOR in exchange for payments of interest at fixed ratesbetween  4.8% and 6.3%. All of the newinterest rate swaps became effective during the quarter and mature inApril 2009. The net settlement of £16.3 million under these interestrate swaps is included within interest expense for the nine months endedSeptember 30, 2006.

We have designated all ofthese new interest rate swaps as cash flow hedges under FAS 133, becausethey are highly effective hedges against changes in the amount of future cashflows attributable to changes in LIBOR. In the nine months endedSeptember 30, 2006, we recorded £7.3 million of unrealized losses inaccumulated other comprehensive income (loss) as a result of the increase infair market value of these interest rate hedges. Certain interest rate swapsentered into under our previous financing arrangements are not designated ashedges under FAS 133. Changes in the fair value of these contracts arerecognised through gains (losses) on derivative instruments in our Statement ofOperations.

*Cross-CurrencyInterest Rate Swaps—Hedging the Interest Payments of Senior Notes and SeniorCredit Facility*

During the quarter we entered into cross-currencyswaps to fix the sterling value of interest payments on the U.S. dollar andeuro denominated portions of the senior credit facility and the senior notesdue 2016.

As of September 30, 2006, we had outstandingcross-currency interest rate swaps with principal amounts of $1,625 millionand €725 million.We currently hedge the interest payments on U.S. dollar and eurodenominated  senior notes due 2014, aswell as interest payments on the U.S. dollar denominated portion of oursenior credit facility, as well as the $550 million senior notes due 2016.Under these cross-currency swaps, we receive interest inU.S. dollars at fixed rates of 8.75% and 9.125% and variable rate based onUSLIBOR, and in euros at a fixed  rate of8.75%, in exchange for payments of interest in pound sterling at fixed ratesranging from 8.5% to 9.4%, and variable LIBOR based on the pound sterlingequivalent of $1,625 million and €725 million. The netsettlement of £2.3 million under these cross-currency interest rate swapsis included within interest expense for the nine months endedSeptember 30, 2006.

We have designated thesecross-currency swaps as cash flow hedges under FAS 133 because theyhedge the changes in the pound sterling value of the interest payments on ourU.S. dollar and euro denominated senior notes due 2014 and 2016 and theU.S. dollar and euro denominated portion of our senior credit facility,that result from changes in the U.S. dollar, euro and pound sterlingexchange rates. In the nine months ended September 30, 2006, we recorded£28.4 million of unrealized losses in accumulated other comprehensive income(loss) as a result of the changes in fair market value of these cross-currencyinterest rate swaps.

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

*Foreign CurrencyForward Rate Contracts—Hedging the Principal Obligations of the U.S. DollarSenior Notes and Senior Credit Facility*

As of September 30, 2006, we had outstandingforeign currency forward rate contracts to purchase $425 million, maturing inApril 2009. These contracts hedge changes in the pound sterling value ofthe U.S. dollar and euro denominated principal obligation of the 8.75% seniornotes due 2014 caused by changes in the U.S. dollar and pound sterling exchangerates. The principal obligations under the $550 million 9.125% senior notes due2016, and the $646 million and €498 million principalobligations under the senior credit facility are hedged via the aforementionedcross-currency swaps, and are not separate forward rate contracts.

The foreign currency forward rate contracts have notbeen designated as hedges under FAS 133. As such, the contracts arecarried at fair value on our balance sheet with changes in the fair valuerecognised immediately in the income statement. The foreign currency forwardrate contracts do not subject us to material volatility in our earnings andcash flows because changes in the fair value partially mitigate the gains orlosses on the translation of our U.S. dollar and euro denominated debtinto pound sterling, in accordance with FASB Statement No. 52, *Foreign Currency Translation*. Changes infair value of these contracts are reported within foreign exchanges gains(losses).

Net changes in the fair value of the foreign currencyforward rate contracts recognised in loss from continuing operations for thethree and nine months ended September 30, 2006 and 2005 were as follows(in millions) (unaudited):
|                                                                           | ** ** | **Three months ended  September 30,** | ** ** | **Nine months  ended  September 30,** | ** ** |
|---------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                | ** ** | **2006**                                             | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net gain (loss) in  fair value of foreign currency forward rate contracts |       | £                                               | 3.2        |                                            | £     | (0.6 | ) | £ | (15.4 | ) | £ | 11.0 |   |
|                                                                           |            |                                                      |            |                                                 |            |  |  |  |  |  |  |  |  |

 

**Note 7—EmployeeBenefit Plans**

Thecomponents of net periodic pension cost in the three and nine months ended September 30,2006 and 2005 were as follows (in millions) (unaudited):

| ** **                      | ** ** | **Three months  ended  September 30,** | ** ** | **Nine months  ended  September 30,** | ** ** |
|---------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                      | ** ** | **2006**                                         | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service costs                   |       | £                                           | 0.7        |                                            | £     | 0.6 |   | £ | 2.1 |   | £ | 2.2 |   |
| Interest costs                  |       | 3.9                                              |       | 3.6                                             |       | 11.7 |   | 10.8 |   |
| Expected return  on plan assets |       | (4.2                                             | )          | (3.8                                            | )          | (12.5 | ) | (11.1 | ) |
| Settlements and  curtailments   |       | 0.3                                              |       | —                                          |       | 0.9 |   | (0.1 | ) |
| Net periodic benefit  costs     |       | £                                           | 0.7        |                                            | £     | 0.4 |   | £ | 2.2 |   | £ | 1.8 |   |

 

*Employer Contributions*

We previously disclosed inour financial statements for the year ended December 31, 2005, that weexpected to contribute £2.2 million to our pension plans in 2006. For thethree and nine months ended September 30, 2006 we contributed £0.5 millionand £1.4 million respectively, to our pension plans. We 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

anticipatecontributing an additional £0.8 million to fund our pension plans in 2006 for atotal of £2.2 million.

**Note 8—OtherCharges Including Restructuring Charges**

Other charges of £28.2 million for the three monthsended September 30, 2006, relate to our historical restructuringprograms and restructuring programs initiated in respect of the reverseacquisition of Telewest. Liabilities with respect to Telewest property leaseexit costs and Telewest involuntary employee termination costs were recognisedon the balance sheet of the acquired entity in accordance with EITF 95-3,*“Recognition of Liabilities in Connection withPurchase Combinations”*. Liabilities with respect to NTL propertyexit costs and involuntary employee termination costs under the restructuringprogram are recorded in the period the liability is incurred or the plan iscommunicated to employees. As of September 30, 2006, we have incurred £43.8 million,and we expect to incur a total of approximately £133 million, of costs tofully execute this program.

Thefollowing tables summarize our historical restructuring provisions and therestructuring provisions resulting from the reverse acquisition of Telewest atSeptember 30, 2006 (in millions) (unaudited):

| **Historical Restructuring Provisions** | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  December 31, 2005                  |       |       | £     | —                                                          |       |                   | £     | 42.5      |       | £ | 42.5 |   |
| Charged to  expense                               |       |       | —     |                                                            |       | 2.8                    |       | 2.8       |       |
| Utilized                                          |       |       | —     |                                                            |       | (5.3                   | )          | (5.3      | )          |
| Balance,  September 30, 2006                 |       |       | £     | —                                                          |       |                   | £     | 40.0      |       | £ | 40.0 |   |

 

| **Acquisition restructuring provisions**                              | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|---------------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  December 31, 2005                                                |       |       | £     | —                                                          |       |                   | £     | —    |       | £ | — |   |
| Provisions  resulting from business acquisition recognised under EITF 95-3 |       |       | 34.8       |                                                            |       | 33.2                   |       | 68.0      |       |
| Amendments to  business acquisition related provision                           |       |       | —     |                                                            |       | 12.7                   |       | 12.7      |       |
| Charged to  expense                                                             |       |       | 26.2       |                                                            |       | 18.7                   |       | 44.9      |       |
| Utilized                                                                        |       |       | (41.7      | )                                                               |       | (2.1                   | )          | (43.8     | )          |
| Balance,  September 30, 2006                                               |       |       | £     | 19.3                                                            |       |                   | £     | 62.5      |       | £ | 81.8 |   |

 

**Note 9—Stockholders’Equity**

On June 19, 2006 weissued shares to NTL Cable PLC for cash consideration of £2.42 billion whichwas utilized to effect our acquisition of Telewest UK Limited and itssubsidiaries.

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

*Stock Option Plans*

We are an indirect, wholly-owned subsidiary of NTL.Accordingly, we have no stock-based compensation plans. As at September 30,2006, certain of our employees participated in the stock-based compensationplans of NTL, which are described in NTL Holdings’ 2005 Annual Report on Form 10-K.

As disclosed inNTL Holdings’ 2005 Annual Report on Form 10-K, NTL Holdingsadopted Statement of Financial Accounting Standards (SFAS) No. 123(revised 2004), *Share-Based Payment,*effective January 1, 2006. As a result, we recorded a cumulative effect ofa change in accounting principle of £1.2 million to reduce compensationexpense recognised in previous periods.

**Note 10—Comprehensive(Loss) Income**

Comprehensive(loss) income comprises (in millions) (unaudited):

| ** **                                    | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|-----------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net (loss) income  for period                 |       | £                                               | (87.7      | )                                                   | £     | (65.4 | ) | £ | (240.8 | ) | £ | 475.9 |   |
| Net unrealized  (losses) gains on derivatives |       | (12.4                                                | )          | 6.5                                                 |       | (20.4 | ) | 12.1 |   |
| Pension liability  adjustment                 |       | —                                               |       | —                                              |       | — |   | 2.1 |   |
| Comprehensive (loss)  income                  |       | £                                               | (100.1     | )                                                   | £     | (58.9 | ) | £ | (261.2 | ) | £ | 490.1 |   |

 

Thecomponents of accumulated other comprehensive income, net of taxes, were asfollows (in millions):

| ** **                            | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                            | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| Pension liability  adjustments        |       |                         | £     | (18.2                       | )          |   |   | £ | (18.2 | ) |   |
| Net unrealized  losses on derivatives |       |                         | (20.4      | )                           |       |   | (0.8 | ) |   |
|                                  |       |                         | £     | (38.6                       | )          |   |   | £ | (19.0 | ) |   |

 

**Note 11—IncomeTaxes**

At each period end, it isnecessary for us to make certain estimates and assumptions to compute theprovision for income taxes including, but not limited to the expected operatingincome (or loss) for the year, projections of the proportion of income (orloss) earned and taxed in the United Kingdom and the extent to which thisincome (or loss) may also be taxed in the United States, permanent andtemporary differences, the likelihood of deferred tax assets being recoveredand the outcome of contingent tax risks. At each interim period, managementuses the best information available to develop these estimates and assumptions,which are used to compute the forecast effective tax rate for the full yearwhich is applied in computing the income tax expense or benefit for the interimperiod. In accordance with U.S. Generally Accepted Accounting Principles, theimpact of revisions to these estimates are recorded as income tax expense orbenefit in the period in which they become known. Accordingly, the accountingestimates used to compute the provision for income taxes have and will changeas new events occur, as more experience is acquired, as additional informationis obtained and our tax environment changes. To the extent that the 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

estimatechanges during a subsequent quarter the effect of the change on prior quartersas well as on the current quarter is included in income tax expense for thecurrent quarter.

**Note 12—RelatedParty Transactions**

We arean indirect, wholly-owned subsidiary of NTL. The following informationsummarizes our significant related party transactions with NTL and itssubsidiary companies (in millions) (unaudited):

| ** **                                    | ** ** | **Three months ended  September 30,** | ** **       | **Nine months ended  September 30,** | ** ** |
|-----------------------------------------------|------------|------------------------------------------------------|------------------|-----------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                             | ** **       | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| Operating costs                               |       | £                                               |   12.0 |                                                | £     |   4.4 |   | £ |   37.7 |   | £ |   13.0 |   |
| Selling, general and  administrative expenses |       | 9.0                                                  |             | 8.6                                                 |       | 28.0 |   | 26.3 |   |
|                                               |            |                                                      |                  |                                                     |            |  |  |  |  |  |  |  |  |

 

Intercompanyinterest is charged from/to us by NTL and its subsidiary companies based onintercompany debt balances. Intercompany interest income and expense iscalculated using a weighted average interest rate of external borrowings by NTLand its subsidiary companies. The following information summarizes the amountsof intercompany interest charged from/to us by NTL and its subsidiarycompanies, which is included within interest income and expense in our Statementsof Operations (in millions) (unaudited):

| ** **       | ** ** | **Three months ended  September 30,** | ** **       | **Nine months ended  September 30,** | ** ** |
|------------------|------------|------------------------------------------------------|------------------|-----------------------------------------------------|------------|
| ** **       | ** ** | **2006**                                             | ** **       | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| Interest income  |       | £                                               |   (2.7 | )                                                   | £     |   1.0 |   | £ |   1.6 |   | £ |   1.0 |   |
| Interest expense |       | 26.9                                                 |             | 21.8                                                |       | 74.3 |   | 72.4 |   |
|                  |            |                                                      |                  |                                                     |            |  |  |  |  |  |  |  |  |

 

Theamounts due to NTL and its subsidiary companies included in our consolidatedbalance sheets as of September 30, 2006 and December 31, 2005were as follows (in millions):

| ** **                                | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| Due from parent  and subsidiary companies |       |                         | £     | 716.9                       |       |   |   | £ | 61.0 |   |   |
| Interest payable                          |       |                         | 76.0       |                        |       |   | 42.6 |   |   |
| Due to parent and  subsidiary companies   |       |                         | —     |                        |       |   | 111.8 |   |   |
| Long-term debt.                           |       |                         | 1,393.4    |                        |       |   | 1,016.8 |   |   |

 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

**Note 13—Commitmentsand Contingent Liabilities**

At September 30,2006, we were committed to pay approximately £421.6 million for equipment,services and licenses. This amount includes approximately £90.6 million foroperations and maintenance contracts and other commitments from October 1,2007 to 2016. The aggregate amount of the fixed and determinable portion ofthese obligations for the succeeding five fiscal years is as follows (inmillions) (unaudited):

| Year ended September 30, |   |   |   |
|-----------------------------------------|--------|--------|--------|
| 2007                                    |   | £ | 331.0  |   |
| 2008                                    |   | 9.8    |   |
| 2009                                    |   | 23.4   |   |
| 2010                                    |   | 8.5    |   |
| 2011                                    |   | 8.5    |   |
| Thereafter                              |   | 40.4   |   |
|                                    |   | £ | 421.6  |   |

 

We are involved in certain disputes and litigationarising in the ordinary course of our business. None of these matters areexpected to have a material adverse effect on our financial position, resultsof operations or cash flows.

Ourbanks have provided guarantees in the form of performance bonds on our behalfas part of our contractual obligations. The fair value of the guarantees hasbeen calculated by reference to the monetary value for each performance bond.The amount of commitment expires over the following periods (in millions)(unaudited):

| Year ended September 30, |   |   |   |
|-----------------------------------------|--------|--------|--------|
| 2007                                    |   | £ | 4.9    |   |
| 2008                                    |   | 2.2    |   |
| 2009                                    |   | 9.8    |   |
| 2010                                    |   | — |   |
| 2011                                    |   | — |   |
| Thereafter                              |   | 8.6    |   |
|                                    |   | £ | 25.5   |   |

 

**Note 14—RecentAccounting Pronouncements**

In May 2005, the Financial Accounting StandardsBoard issued Statement of Financial Accounting Standards (“SFAS”) No. 154,*Accounting Changes and Error Corrections—areplacement of APB Opinion No. 20 and FASB Statement No. 3*.SFAS 154 replaces Accounting Principles Board (“APB”) Opinion No. 20,*Accounting Changes*, and SFAS 3,*Reporting Accounting Changes in Interim FinancialStatements*, and changes the requirements for the accounting for, andreporting of, a change in accounting principle. This statement carries forwardwithout change the guidance contained in Opinion 20 for reporting thecorrection of an error in previously issued financial statements and a changein accounting estimate. SFAS 154 is effective for accounting changes andcorrections of errors in fiscal years beginning after 

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**NTL INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

December 31, 2005.Early adoption is permitted for accounting changes and corrections of errorsmade in fiscal years beginning after the date SFAS 154 is issued. The adoptionof SFAS 154 did not have a material impact on our consolidated financialstatements.

In July 2006, the FASB issued FASB Interpretation(“FIN”) No. 48 *Accounting for Uncertaintyin Income Taxes—an interpretation of FASB Statement 109*. FIN 48prescribes a comprehensive model for recognizing, measuring, presenting anddisclosing in the financial statements tax positions taken or expected to betaken on a tax return, including a decision whether to file or not to file in aparticular jurisdiction. FIN 48 is effective for fiscal years beginning after December 15,2006. If there are changes in net assets as a result of application of FIN 48these will be accounted for as an adjustment to retained earnings. We arecurrently assessing the impact of FIN 48 on our consolidated financial positionand results of operations.

 

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**ITEM 2.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

*The following discussion should be read in conjunctionwith the Condensed Consolidated Financial Statements and related notes of NTLIncorporated that appear elsewhere in this document.*

**OVERVIEW**

We are one of the leading communications and contentdistribution companies in the United Kingdom (U.K.), providing internetaccess, fixed line telephone, and television services to approximately5 million residential on-net customers. We also provide internet andtelephone services to our residential customers who are not connected to ourcable network via access to other companies’ telecommunications networks andvia an internet service provider operated by our subsidiary, Virgin NetLimited. We offer what we refer to as a “triple play” bundle of internet,telephone and television services through competitively priced bundledpackages. We also provide a range of voice services to businesses and publicsector organizations, as well as a variety of data communications solutionsfrom high speed internet access to fully managed business communicationsnetworks and communication transport services. These services are deliveredthrough our wholly-owned local access communications network passing more than12.5 million homes in the U.K. The design and capability of our networkprovides us with the ability to offer “triple play” bundled services toresidential customers and a broad portfolio of reliable, competitive communicationssolutions to business customers.

Through our wholly-owned subsidiaries, FlextechLimited (“Flextech”) and sit-up Limited (“sit-up”), we provide basic televisionchannels and related services to the U.K. multi-channel broadcasting market anda wide variety of consumer products by means of sit-up’s auction based shoppingchannels. Flextech’s line up of television channels includes Living TV, Bravo,Ftn, Trouble and Challenge TV. Flextech is also BBC Worldwide’s 50% partner inUKTV and its channels.

Through our acquisition ofVirgin Mobile in July 2006, we now provide mobile telephony services toapproximately 4.5 million customers. Consequently, we now have the opportunityto offer “quad-play” bundled services to our residential customers by addingmobile telephony to our internet, fixed line telephony and television services.We launched “quad-play” services towards the end of September 2006.

***Acquisitions and Disposals***

*Acquisition ofVirgin Mobile*

On July 4, 2006, we acquired 100% of theoutstanding shares and options of Virgin Mobile through a U.K. Scheme ofArrangement. Virgin Mobile is the largest mobile virtual network operator inthe United Kingdom, with approximately 4.5 million customers.

The total purchase price of approximately£952.2 million included cash of approximately £418.2 million, commonstock valued at £518.8 million and estimated direct transaction costs of£15.2 million. The average market price per share of common stock utilizedin determining the value of the new common stock issued of £15.07 ($26.59) isbased on an average of the closing prices of NTL common stock divided by theTelewest acquisition conversion ratio of 2.5 times for a range of trading days(January 12, January 13, January 17, January 18, January 19)around the announcement date of the proposed acquisition (January 16,2006).

We financed the cash portion of the offer andtransactional expenses through £475 million of additional bank borrowingscommitted under our existing senior credit facility and cash on hand.

On May 24, 2006, wereceived approval by a majority of the shareholders of Virgin Mobile, otherthan those associated with affiliates of the Virgin Group, to enter into atrademark license agreement with 

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VirginEnterprises Limited under which we are entitled to use certain Virgintrademarks within the United Kingdom and Ireland. The agreement was enteredinto on the same date and is an exclusive license covering a number of aspectsof our consumer business, including the provision of communications services (suchas internet, television, fixed line telephony, and upon the acquisition ofVirgin Mobile, mobile telephony), the acquisition and branding of sports, movieand other premium television content, and the branding and sale of certaincommunications equipment related to our consumer businesses, such as set topboxes and cable modems. The agreement provides for a royalty of 0.25% per annumof our revenue from the relevant businesses, subject to a minimum annualroyalty of £8.5 million (the royalty would have been approximately £9million based on combined historical NTL and Telewest 2005 revenues includingrevenue from Virgin Mobile and our subsidiary Virgin.net). The agreementreplaces the existing license agreement under which our subsidiary Virgin.net wasentitled to use the Virgin brand in relation to its internet business. Theagreement has a term of 30 years. It can be terminated after 10 years on oneyear’s notice, and it is subject to earlier termination by us in certain othercircumstances, including (subject to specified payments) upon a change ofcontrol. The agreement also entitles us to use a corporate name that includesthe Virgin name. We expect to commence the proposed re-branding of our consumeroperations in early 2007 and the re-branding is expected to include a change inthe name of the corporate parent.

*Reverse Acquisitionof Telewest*

On March 3, 2006, NTL Holdings Inc. (formerlyknown as NTL Incorporated) merged with a subsidiary of NTL Incorporated(formerly known as Telewest Global, Inc. or Telewest) and the merger hasbeen accounted for as a reverse acquisition of Telewest using the purchasemethod. This merger created the U.K.’s largest provider of residentialbroadband and triple play services. In connection with this transaction,Telewest changed its name to NTL Incorporated.

The total purchase price of approximately£3.5 billion included cash of approximately £2.3 billion, commonstock valued at £1.1 billion, stock options with a fair value of £29.8 millionand estimated direct transaction costs of £25.1 million. The averagemarket price per share of common stock utilized in determining the value of thenew common stock issued of £13.00 ($22.90) is based on an average of theclosing prices of the Telewest common stock for a range of trading days (September 29,September 30, October 3, October 4 and October 5, 2005)around the announcement date of the proposed merger (October 3, 2005). Thecash payment of £2.3 billion was based on the redemption value of $16.25(£9.30) per share of Telewest redeemable common stock issued in exchange forTelewest common stock in the transaction and 246.0 million shares ofTelewest redeemable common stock so issued.

The outstanding options to purchase shares of NTLHoldings Inc. (“NTL Holdings”) common stock were exchanged for options topurchase shares of NTL Incorporated new common stock with the same terms andconditions.

The outstanding options to purchase shares of Telewestcommon stock were converted into options to purchase shares of NTL Incorporatednew common stock at an option price calculated in accordance with the formulain the merger agreement. In accordance with the terms of Telewest’sequity-based plans, a significant proportion of Telewest’s outstanding optionsthat were granted prior to March 3, 2006 vested upon completion of themerger. All vested and unvested options of Telewest have been recorded at theirfair value by using the Black-Scholes option pricing model.

On June 19, 2006, inconnection with the integration of NTL and Telewest, we engaged in a postacquisition restructuring of Telewest UK Limited and its subsidiaries in orderto integrate their operations with NTL’s existing U.K. operations and toimplement permanent financing.  Thisrestructuring involved a series of steps that included internal contributions,distributions, mergers and acquisitions as well as borrowings from externalsources and contributions of the proceeds of the same to NTLIH to effect its 

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acquisitionof the shares of Telewest UK Limited and its subsidiaries.  The completion of this restructuring resultedin Telewest UK Limited and its subsidiaries becoming wholly-owned subsidiariesof NTLIH.

*Disposal of Broadcast and Ireland Operations*

On January 31, 2005, wesold our Broadcast operations to a consortium led by Macquarie CommunicationsInfrastructure Group. The cash proceeds from the sale were approximately£1.3 billion. Our Broadcast operations provided site leasing, broadcasttransmission, satellite, media, public safety communications and other networkservices, utilizing broadcast transmission infrastructure, wirelesscommunications and other facilities.

On May 9, 2005, wesold our telecommunications operations in the Republic of Ireland to MS IrishCable Holdings B.V., an affiliate of Morgan Stanley, for an aggregate purchaseprice of €333.4 million, or £225.5 million. Duringthe three months ended September 30, 2006, we were able to release certaincontingent tax liabilities of £8.1 million relating to the disposal of ourformer Ireland operations.

As a result of the sale ofour Broadcast and Ireland operations, we have accounted for the Broadcast andIreland operations as discontinued operations in 2005. The results ofoperations for the Broadcast and Ireland operations have been excluded from thecomponents of loss from continuing operations and shown in a separate caption,titled income from discontinued operations. Revenue from the Broadcastoperations reported in discontinued operations for the three and nine monthsended September 30, 2005 was £nil and £21.4 million, respectively. Pre-taxincome from Broadcast operations, reported as pre-tax income from discontinuedoperations, for the three and nine months ended September 30, 2005, was£nil and £3.0 million, respectively. Revenue from the Ireland operationsreported in discontinued operations for the three and nine months ended September 30,2005 was £nil and £25.6 million, respectively. Pre-tax income from Irelandoperations, reported as pre-tax income from discontinued operations, forthe three and nine months ended September 30, 2005 was £nil and £2.5million, respectively.

***Critical AccountingPolicies***

*Business Combinations*

We are required toallocate the purchase price of acquired companies to the tangible andintangible assets acquired and liabilities assumed based on their fair values.We engage third party appraisal firms to assist us in determining the fairvalues of assets acquired and liabilities assumed. Such a valuation requiresmanagement to make significant estimates and assumptions, especially withrespect to intangible assets.

Critical estimates invaluing certain of the intangible assets include but are not limited to: futureexpected cash flows from customer contracts and customer lists; the trademark’sbrand awareness and market position, as well as assumptions about the period oftime the brand will continue to be used in the combined company’s productportfolio; and discount rates. Management’s assumptions about fair value arebased upon assumptions believed to be reasonable, but which are inherentlyuncertain and unpredictable. Assumptions may be incomplete or inaccurate, andunanticipated events and circumstances may occur, which may affect management’sestimates.

Other estimates associatedwith the accounting for these acquisitions may change as additional informationbecomes available regarding the assets acquired and liabilities assumed. Inparticular, liabilities in relation to tax exposures or liabilities torestructure the pre-acquisition businesses of NTL, Telewest and Virgin Mobile,including the exit of properties and termination of employees, are subject tochange as management completes its assessment of pre-merger operations andbegins to execute the approved plan for the integration of the three companies.

***Factors AffectingOur Business***

Our Cable segmentresidential customers account for the majority of our total revenue. The numberof residential customers, the number and types of services that each customeruses and the prices we 

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chargefor these services drive our revenue. Our profit is driven by the relativemargins on the types of services we provide to these customers. For example,broadband internet is more profitable than analogue television services. Ourpackaging of services and our pricing are designed to encourage our customersto use multiple services like dual telephone and broadband. Factorsparticularly affecting our profitability include customer churn, averagerevenue per user (ARPU), competition, and the success of our integrationefforts.

*Summary CableStatistics*

Selectedstatistics for residential cable customers of NTL, excluding customers off ournetwork, Virgin.net and Virgin Mobile customers for the three months ended September 30,2006 as well as the four prior quarters, are set forth in the table below.

| ** **                                             | ** ** | **For the three months ended** | ** **  |
|--------------------------------------------------------|------------|----------------------------------------------------|-------------|
| ** **                                             | ** ** | **September 30,  2006**                       | ** **  | **June 30,  2006** | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** | **September 30,  2005** | ** ** |
| Opening customers                                      |       |                                               | 4,928,700   |   |   | 4,983,800 |   | 3,089,800 |   |   | 3,097,300 |   |   |   | 3,055,900 |   |   |
| Data cleanse(1)                                        |       |                                               | —      |   |   | (36,200 | ) | — |   |   | (18,100 | ) |   |   | — |   |   |
| Adjusted opening  customers                            |       |                                               | 4,928,700   |   |   | 4,947,600 |   | 3,089,800 |   |   | 3,079,200 |   |   |   | 3,055,900 |   |   |
| Increase in  customers on acquisition of Telewest |       |                                               | —      |   |   | — |   | 1,880,400 |   |   | — |   |   |   | — |   |   |
| Customer  additions                                    |       |                                               | 229,200     |   |   | 192,300 |   | 167,100 |   |   | 162,800 |   |   |   | 182,400 |   |   |
| Customer  disconnects                                  |       |                                               | (266,500    | ) |   | (211,200 | ) | (153,500 | ) |   | (142,200 | ) |   |   | (141,000 | ) |   |
| Net customer movement                                  |       |                                               | (37,300     | ) |   | (18,900 | ) | 13,600 |   |   | 20,600 |   |   |   | 41,400 |   |   |
| Reduction in  customer count(2)                        |       |                                               | —      |   |   | — |   | — |   |   | (10,000 | ) |   |   | — |   |   |
| Closing customers                                      |       |                                               | 4,891,500   |   |   | 4,928,700 |   | 4,983,800 |   |   | 3,089,800 |   |   |   | 3,097,300 |   |   |
| Churn(3)                                               |       |                                               | 1.8         | % |   | 1.5 | % | 1.4 | % |   | 1.6 | % |   |   | 1.6% |   |   |
| Revenue  generating units(4)                           |       |                                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Television                                             |       |                                               | 3,315,400   |   |   | 3,293,100 |   | 3,315,900 |   |   | 1,942,700 |   |   |   | 1,940,100 |   |   |
| DTV (included in Television)                           |       |                                               | 2,922,000   |   |   | 2,836,200 |   | 2,786,500 |   |   | 1,445,100 |   |   |   | 1,409,300 |   |   |
| Telephone                                              |       |                                               | 4,178,300   |   |   | 4,233,000 |   | 4,268,100 |   |   | 2,573,100 |   |   |   | 2,598,600 |   |   |
| Broadband                                              |       |                                               | 2,980,400   |   |   | 2,902,300 |   | 2,821,700 |   |   | 1,625,200 |   |   |   | 1,546,300 |   |   |
| Total Revenue  Generating Units                        |       |                                               | 10,474,100  |   |   | 10,428,400 |   | 10,405,700 |   |   | 6,141,000 |   |   |   | 6,085,000 |   |   |
| RGU/Customers                                          |       |                                               | 2.14x       |   |   | 2.12x |   | 2.09x |   |   | 1.99x |   |   |   | 1.96x |   |   |
| Internet dial-up  and DTV access(5)                    |       |                                               | 97,000      |   |   | 113,300 |   | 140,400 |   |   | 123,700 |   |   |   | 145,900 |   |   |
| Cable average  revenue per user(6)                     |       |                                               | £42.48 |   |   | £42.21 |   | £40.37 |   |   | £38.96 |   |   |   | £38.99 |   |   |
| ARPU calculation:                                      |       |                                               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| On-net revenues  (millions)                            |       |                                               | £625.4 |   |   | £628.4 |   | £443.3 |   |   | £361.6 |   |   |   | £359.9 |   |   |
| Average customers(7)                                   |       |                                               | 4,907,000   |   |   | 4,962,000 |   | 3,660,500 |   |   | 3,093,500 |   |   |   | 3,076,600 |   |   |

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(1)          Data cleanse activity inQ2-06 resulted in a decrease of 36,200 customers and 69,000 RGUs, adecrease of approximately 13,500 Telephone, 24,400 Broadband and 31,100 TVRGUs. Data cleanse activity in Q2-06 is a result of more closely aligningcustomer definitions between old NTL and old Telewest together with the removalof approximately 20,000 inactive backlog customers in old NTL.

Data cleanse activity in Q4-05 resulted in adecrease in old NTL of 18,100 customers and 43,100 RGUs, a decrease ofapproximately 17,700 Telephone, 26,600 Broadband and an increase of 1,300 netTV RGUs.

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(2)          Reviewof inactive backlog customers in the three months ended December 31, 2005resulted in an adjustment to remove an additional 10,000 customers.

(3)          Customerchurn is calculated by taking the total disconnects during the month anddividing them by the average number of customers during the month. Averagemonthly churn during a quarter is the average of the three monthly churncalculations within the quarter.

(4)          Eachtelephone, television and broadband internet subscriber directly connected toour network counts as one RGU. Accordingly, a subscriber who receives bothtelephone and television service counts as two RGUs. RGUs may includesubscribers receiving some services for free or at a reduced rate in connectionwith incentive offers.

(5)          Dial-upinternet customers exclude metered customers who have not used the servicewithin the last 30 days.

(6)          Themonthly cable average revenue per user, or cable ARPU, is calculated on aquarterly basis by dividing total revenue generated from the provision oftelephone, television and internet services to customers who are directlyconnected to our network in that period, exclusive of VAT, by the averagenumber of customers directly connected to our network in that period divided bythree. Cable average revenue per user for the three months ended March 31,2006, previously disclosed as £40.92, has, due to the discovery of acalculation error, been restated to £40.37.

(7)          Forthe three months ended March 31, 2006, average customers has beencalculated by adding the average customers who were directly connected to theold NTL network and the pro rata proportion of customers directly connected tothe old Telewest network for the number of days subsequent to the acquisitionof Telewest.

***Customer Churn.******  ***Customer churnis a measure of the number of customers who stop using our services. Anincrease in our customer churn can lead to increased costs and reduced revenue.We continue to focus on improving our customer service and enhancing andexpanding our service offerings to existing customers in an effort to manageour customer churn rate. Although our ability to reduce our customer churn ratebeyond a base level is limited by factors like customers moving outside ournetwork service area, in particular during the summer season, managing our customerchurn rate is a significant component of our business plan. Our customer churnrate may increase if we are unable to deliver our services over our networkwithout interruption or if we fail to match offerings by our competitors. Weare presently aligning our credit policies, which will also increase churn inthe short-term.

***Cable ARPU.******  ***AverageRevenue Per User, or ARPU, is a measure we use to evaluate how effectively weare realizing potential revenue from customers. We believe that our “tripleplay” cable offering of telephone service, broadband access to the internet andtelevision services is attractive to our existing customer base and allows usto increase our Cable ARPU by facilitating the sale of multiple services toeach customer. Cable ARPU excludes any recognition of revenue from our Mobilesegment. With the acquisition of Virgin Mobile we are now able to offer “quad-play”of digital television, broadband, mobile and fixed line telephone services,which we believe will enhance our competitiveness and growth opportunities.

***Competition.******  ***Our ability toacquire and retain customers and increase revenue depends on our competitivestrength. There is significant competition in our markets, including throughother broadband service providers, telephone services offered by BritishTelecom (“BT”) and local loop unbundlers, alternative internet access serviceslike DSL, which is offered by BT, satellite television services offered by BSkyB,digital terrestrial television offered through Freeview, mobile telephoneservices offered by other mobile telephone operators, other television channelsand other advertising media that compete with our content channels, and otherretailers that compete with our shopping channels. If competitive forcesprevent us from charging the prices for these services that we plan to charge,or if our competition is able to attract our customers or potential customerswe are targeting, our results of operations will be adversely affected.

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***CapitalExpenditures.******  ***Our business requires substantialcapital expenditures on a continuing basis for various purposes, includingexpanding, maintaining and upgrading our network, investing in new customeracquisitions, and offering new services. If we do not continue to invest in ournetwork, our ability to retain and acquire customers may be hindered.Therefore, our liquidity and the availability of cash to fund capital projectsare important drivers of our revenue. When our liquidity is restricted, so isour ability to meet our capital expenditure requirements. We believe that ourcash on hand, together with cash from operations, and if required, drawdownsunder our revolving credit facility, will be sufficient for our cashrequirements through September 30, 2007.

***Currency Movements.******  ***We encountercurrency exchange rate risks because all of our revenue and substantially allof our operating costs are earned and paid primarily in U.K. pounds sterling,but we pay interest and principal obligations with respect to a portion of ourexisting indebtedness in U.S. dollars and euros. To the extent that thepound sterling declines in value against the U.S. dollar or the euro, theeffective cost of servicing our U.S. dollar debt or euro debt will be higher.As of September 30, 2006, £866.2 million, or 14.0% of our long-term debt,was denominated in U.S. dollars and £490.1 million, or 7.9%, of ourlong-term debt was denominated in euros. To mitigate the risk from theseexposures, we have implemented a cash flow hedging program. The objective ofthis program is to reduce the volatility of our cash flows and earnings causedby changes in underlying rates.

Currently the principal element of all our U.S. dollarand euro denominated debt is hedged in order to fully mitigate against therisks that are presented by moving exchange rates. In addition to this allpayments of interest in U.S. dollar and euro are also hedged until at least thefirst call date of the underlying instrument. The alternative bridge waspartially re-financed by the $550 million senior notes due 2016 issued by NTLCable PLC on July 25, 2006, and the principal and interest obligationsincumbent upon the Company as a result of this have been hedged to maturity.

***Seasonality.****  *Some revenue streams are subject toseasonal factors. For example, telephone usage revenue by customers andbusinesses tends to be slightly lower during summer holiday months. Ourcustomer churn rates include persons who disconnect their service because ofmoves, resulting in a seasonal increase in our churn rates during the summermonths when higher levels of U.K. house moves occur and students leave theiraccommodations between school years. In addition, our Content segment includesFlextech, which has a seasonally higher programming spend in the fourthquarter, and  sit-up’s home shoppingchannels, which earn potentially higher revenues in the fourth quarter,reflecting the Christmas holiday period, which is common in the retail industry.Similarly, customer growth and related subscriber acquisition costs in ourMobile segment are expected to be higher in the fourth quarter due to theholiday season.

***Integration***.   We arepresently integrating our legacy NTL and Telewest cable businesses. Thisinvolves the incurrence of substantial operating and capital expenditure and,in some cases, involves the outsourcing of key functions in an effort toachieve synergies through the integration of the two businesses. For example,we are consolidating our billing platforms over the next twelve months. Whilethese integration efforts are presently on track, any issues that may arise inconnection with our integration could have a material negative effect on ourfinancial performance.

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**RESULTS OFOPERATIONS**

***Three months ended September 30, 2006 and 2005***

**Historical Resultsfrom Continuing Operations**

*Revenue*

For the three months ended September 30, 2006,consolidated revenue increased by 112.3% to £1,024.9 million from £482.7million for the three months ended September 30, 2005. This increase isprimarily due to the reverse acquisition of Telewest and the inclusion of itsrevenues from March 3, 2006, and to the acquisition of Virgin Mobile andthe inclusion of its revenues from July 4, 2006.

*Expenses*

*Operating costs.**  *For the three months ended September 30,2006, operating costs, including network expenses, increased by 119.8% to£440.0 million from £200.2 million for the three months ended September 30,2005. This increase is primarily attributable to the reverse acquisition ofTelewest and to the acquisition of Virgin Mobile. Operating costs as apercentage of revenue, increased to 42.9% for the three months ended September 30,2006, from 41.5% for the same period in 2005, in part due to the inclusion ofthe Telewest content segment subsequent to the reverse acquisition of Telewest,which has lower margins than our cable segment.

*Selling, general andadministrative expenses.**  *For the three months ended September 30, 2006,selling, general and administrative expenses increased by 129.9% to £267.1million from £116.2 million for the three months ended September 30, 2005.This increase is primarily attributable to the reverse acquisition of Telewestand to the acquisition of Virgin Mobile. Selling, general and administrativeexpenses as a percentage of revenue increased to 26.1% for the three monthsended September 30, 2006 from 24.1% for the same period in 2005, partlydue to costs incurred in connection with the integration of NTL and Telewest inthe three months ended September 30, 2006.

*Other charges*

Other charges of £30.9 million in the three monthsended September 30, 2006 relate primarily to employee termination costsand lease exit costs in connection with our restructuring programs initiated inrespect of the reverse acquisition of Telewest. Other charges of £1.3 millionin the three months ended September 30, 2005 mainly related torestructuring charges incurred in connection with lease exit costs under ourhistorical programs.

Thefollowing tables summarize our historical restructuring provisions and therestructuring provisions resulting from the reverse acquisition of Telewest at September 30,2006 (in millions):

| **Historical Restructuring Provisions** | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  June 30, 2006                      |       |       | £     | —                                                          |       |                   | £     | 44.6      |       | £ | 44.6 |   |
| Charged to  expense                               |       |       | —     |                                                            |       | 0.8                    |       | 0.8       |       |
| Utilized                                          |       |       | —     |                                                            |       | (2.8                   | )          | (2.8      | )          |
| Balance,  September 30, 2006                 |       |       | £     | —                                                          |       |                   | £     | 42.6      |       | £ | 42.6 |   |

 

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| **Acquisition Restructuring Provisions**    | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|-------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  June 30, 2006                          |       |       | £     | 24.9                                                            |       |                   | £     | 47.6      |       | £ | 72.5 |   |
| Amendments to business  acquisition related provision |       |       | —     |                                                            |       | 4.0                    |       | 4.0       |       |
| Charged to  expense                                   |       |       | 16.5       |                                                            |       | 13.6                   |       | 30.1      |       |
| Utilized                                              |       |       | (21.4      | )                                                               |       | (1.4                   | )          | (22.8     | )          |
| Balance,  September 30, 2006                     |       |       | £     | 20.0                                                            |       |                   | £     | 63.8      |       | £ | 83.8 |   |

 

*Depreciationexpense*

For the three months ended September 30, 2006,depreciation expense increased to £222.6 million from £142.3 million forthe three months ended September 30, 2005. This increase is primarilyattributable to the reverse acquisition of Telewest and related fair valueadjustment to the property and equipment acquired, and to the acquisition ofVirgin Mobile. Excluding the impact of the reverse acquisition of Telewest andof the acquisition of Virgin Mobile, depreciation expense has decreased due tothe absence of depreciation on some assets that became fully depreciated in2005.

*Amortizationexpense*

For the three months ended September 30, 2006,amortization expense increased to £73.9 million from £27.4 million for thethree months ended September 30, 2005. The increase in amortizationexpense relates to additional intangible assets arising from the reverseacquisition of Telewest and from the acquisition of Virgin Mobile.

*Interestexpense*

For the three months endedSeptember 30, 2006, interest expense increased to £113.2 million from£51.7 million for the three months ended September 30, 2005, primarily asa result of the additional borrowing as a result of the reverse acquisition ofTelewest and the acquisition of Virgin Mobile.

We paid gross cash interest of £48.3 million for the threemonths ended September 30, 2006, and £7.9 million for the three monthsended September 30, 2005. The increase in cash interest payments resultedfrom the effects of the new senior credit facility and senior bridge facilityin respect of the reverse acquisition of Telewest and the acquisition of VirginMobile, and changes in timing of interest payments.

*Losson extinguishment of debt*

For the three months ended September 30, 2006,loss on extinguishment of debt decreased to £0.5 million from £2.0 million forthe three months ended September 30, 2005. Loss on extinguishment of debtfor the three months ended September 30, 2005 related to our redemption ofthe floating rate senior notes due 2012 on July 15, 2005.

*Foreigncurrency gains and losses*

The foreign currency gains of £6.3 million in thethree months ended September 30, 2006 were largely comprised of foreignexchange gains of £8.5 million on U.S. dollar forward purchase contracts thatwere entered into to hedge the repayment amount of the U.S. dollar denominatedbridge facility offset by losses of £5.8 million relating to the repayment ofthe alternative bridge facility.

For the three months ended September 30, 2005,foreign currency transaction losses were £13.1 million. These losses for thethree months ended September 30, 2005 were primarily because of the effect

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ofchanges in the exchange rate on our U.S. dollar and euro denominated debt andunrealized losses of £0.6 million arising from changes in the fair value of ourforeign currency forward contracts.

*Gainfrom derivative instruments*

The gain from derivative instruments of £1.6 millionin the three months ended September 30, 2006, mainly relates to favorablemovements in the mark-to-market values of sterling interest rate swaps.

*Incometax benefit*

For the three months endedSeptember 30, 2006, income tax benefit was £0.9 million as compared with£12.4 million benefit for the same period in 2005.

For the three months ended September 30, 2006,the tax benefit of £0.9 million was comprised of federal taxes of £0.3 million,and U.K. taxes of £0.6 million. The U.K. tax benefit related to amountsreceivable in respect of the surrender of U.K. tax losses arising in thecurrent period to our equity investments.

** Segment Information**

A description of theproducts and services, as well as year-to-date financial data, for each segmentcan be found above in Note 14 to the Consolidated Condensed FinancialStatements.

The segment results forthe three month period ended September 30, 2006 are reported on an actualbasis and include the results of Telewest from July 1, 2006 and theresults of Virgin Mobile from July 4, 2006. The results of operations ofour Cable and Content segments for the three month period ended September 30,2005 are reported on a pro forma combined basis as if the reverse acquisitionof Telewest had occurred at the beginning of the period presented and combinesTelewest’s historical Content and sit-up segments into the combinedcompany’s Content segment. The pro forma data has been calculated on a basisconsistent with the pro forma financial information filed under our Form 8-K/Afiled on May 10, 2006. We believe that a pro forma comparison of thesesegments is more relevant than a historic comparison as: (a) in respect of ourCable segment, the size of the acquired legacy Telewest cable business would obscureany meaningful discussion of changes in our cable business if viewed on ahistorical basis; and (b) we did not have a Content segment in the priorperiod. Comparative pro forma results of our Mobile segment have not beenpresented.

The reportable segmentsdisclosed in this Form 10-Q are based on our managementorganizational structure as of September 30, 2006. Future changes to thisorganizational structure may result in changes to the reportable segmentsdisclosed.

Segment operating income before depreciation,amortization and other charges, which we refer to as Segment OCF, is management’smeasure of segment profit as permitted under SFAS 131, *“Disclosuresabout Segments of an Enterprise and Related Information”.* Ourmanagement, including our chief executive officer who is our chief operatingdecision maker, considers Segment OCF as an important indicator of theoperational strength and performance of our segments. Segment OCF excludes theimpact of costs and expenses that do not directly affect our cash flows. Othercharges, including restructuring charges, are also excluded from Segment OCF asmanagement believes they are not characteristic of our underlying businessoperations.

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***CableSegment***

The summary results ofoperations of our Cable segment were as follows (in millions):

| ** **                                    | ** ** | **Three months ended  September 30** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| ** **                                    | ** ** | **Actual**                                          | ** ** | **Pro forma** | ** ** |
| Revenue                                       |       | £                                              | 805.1      |   |   | £ | 795.1 |   |   |
| Inter segment  revenue                        |       | 0.9                                                 |       |   | 0.7 |   |   |
| Segment OCF                                   |       | 296.3                                               |       |   | 299.5 |   |   |
| Depreciation,  amortization and other charges |       | (306.9                                              | )          |   | (286.6 | ) |   |
| Operating (loss) income                       |       | £                                              | (10.6      | ) |   | £ | 12.9 |   |   |

 

*Revenue*

Our Cable segment revenueby customer type for the three months ended September 30, 2006 and 2005was as follows (in millions):

| ** **    | ** ** | **Three months ended  September 30** | ** ** | **Increase/**      | ** ** |
|---------------|------------|-----------------------------------------------------|------------|--------------------|------------|
| ** **    | ** ** | **2006**                                            | ** ** | **2005**           | ** ** | **(Decrease)** | ** ** |
| ** **    | ** ** | **Actual**                                          | ** ** | **Pro forma** | ** ** | ** ** | ** ** |
| Revenue:      |       |                                                |       |               |       |   |   |   |   |   |   |
| Consumer      |       | £                                              | 642.8      |               |       | £ | 626.0 |   |   |   | 2.7 | % |   |
| Business      |       | 162.3                                               |       |               | 169.1      |   |   |   | (4.0 | )% |   |
| Total revenue |       | £                                              | 805.1      |               |       | £ | 795.1 |   |   |   | 1.3 | % |   |

 

*Consumer:*   Forthe three months ended September 30, 2006, revenue from residentialcustomers increased by 2.7% to £642.8 million from £626.0 million on a proforma basis for the three months ended September 30, 2005. This increaseis driven largely by our efforts at driving “triple play” bundles together withtelephony price rises partially offset by lower telephony usage and customerlosses.

*Business:*   Forthe three months ended September 30, 2006, revenue from business customersdecreased by 4.0% to £162.3 million from £169.1 million on a pro forma basis forthe three months ended September 30, 2005. This decrease is attributableto declines in telephony voice revenue and lower wholesale and other contractrevenue, partially offset by greater data installation and rental revenue.

*SegmentOCF*

For the three months ended September 30, 2006, Cablesegment OCF decreased to £296.3 million from £299.5 million on a pro formabasis for the three months ended September 30, 2005. The decrease in OCFis primarily due to costs incurred in connection with the integration ofTelewest, additional share based compensation expense, increased marketingexpenses and higher bad debt expense compared with the three months ended September 30,2005.

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*Pro Forma Summary CableStatistics*

Selected pro formacombined statistics for residential cable customers of NTL and Telewestexcluding customers off our network, Virgin.net and Virgin Mobile customers forthe three months ended September 30, 2006 as well as the four priorquarters are set forth in the table below. Amounts shown assume the merger ofNTL and Telewest had occurred on January 1, 2005.

| ** **                          | ** ** | **For the three months ended** | ** ** |
|-------------------------------------|------------|----------------------------------------------------|------------|
| ** **                          | ** ** | **September 30,  2006**                       | ** ** | **June 30,  2006** | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** | **September 30,  2005** | ** ** |
| Opening customers                   |       | 4,928,700                                          |       | 4,983,800 |   | 4,958,000 |   | 4,945,400 |   | 4,893,100 |   |
| Data cleanse(1)                     |       | —                                             |       | (36,200 | ) | — |   | (18,100 | ) | — |   |
| Adjusted opening  customers         |       | 4,928,700                                          |       | 4,947,600 |   | 4,958,000 |   | 4,927,300 |   | 4,893,100 |   |
| Customer  additions                 |       | 229,200                                            |       | 192,300 |   | 218,100 |   | 248,900 |   | 271,900 |   |
| Customer  disconnects               |       | (266,500                                           | )          | (211,200 | ) | (192,300 | ) | (208,200 | ) | (219,600 | ) |
| Net customer movement               |       | (37,300                                            | )          | (18,900 | ) | 25,800 |   | 40,700 |   | 52,300 |   |
| Reduction in  customer count(2)     |       | —                                             |       | — |   | — |   | (10,000 | ) | — |   |
| Closing customers                   |       | 4,891,500                                          |       | 4,928,700 |   | 4,983,800 |   | 4,958,000 |   | 4,945,400 |   |
| Churn(3)                            |       | 1.8                                                | %          | 1.5 | % | 1.3 | % | 1.4 | % | 1.5 | % |
| Revenue  generating units(4)        |       |                                               |       |   |   |   |   |   |   |   |   |
| Television                          |       | 3,315,400                                          |       | 3,293,100 |   | 3,315,900 |   | 3,310,300 |   | 3,288,700 |   |
| DTV(included in  Television)        |       | 2,922,000                                          |       | 2,836,200 |   | 2,786,500 |   | 2,715,900 |   | 2,637,500 |   |
| Telephone                           |       | 4,178,300                                          |       | 4,233,000 |   | 4,268,100 |   | 4,260,000 |   | 4,285,000 |   |
| Broadband                           |       | 2,980,400                                          |       | 2,902,300 |   | 2,821,700 |   | 2,630,300 |   | 2,466,500 |   |
| Total Revenue  Generating Units     |       | 10,474,100                                         |       | 10,428,400 |   | 10,405,700 |   | 10,200,600 |   | 10,040,200 |   |
| RGU/Customers                       |       | 2.14                                               | x          | 2.12 | x | 2.09 | x | 2.06 | x | 2.03 | x |
| Internet dial-up  and DTV access(5) |       | 97,000                                             |       | 113,300 |   | 140,400 |   | 181,600 |   | 219,000 |   |
| Cable average  revenue per user(6)  |       | £42.48                                        |       | £42.21 |   | £41.50 |   | £41.27 |   | £41.28 |   |
| ARPU calculation:                   |       |                                               |       |   |   |   |   |   |   |   |   |
| On-net revenues  (millions)         |       | £625.4                                        |       | £628.4 |   | £618.6 |   | £613.4 |   | £608.8 |   |
| Average customers                   |       | 4,907,000                                          |       | 4,962,000 |   | 4,969,000 |   | 4,954,000 |   | 4,916,000 |   |

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(1)          Data cleanse activity inQ2-06 resulted in a decrease of 36,200 customers and69,000 RGUs, a decrease of approximately 13,500 Telephone, 24,400Broadband and 31,100 TV RGUs. Data cleanse activity in Q2-06 is aresult of more closely aligning customer definitions between old NTL and oldTelewest together with the removal of approximately 20,000 inactive backlogcustomers in old NTL.

                           Data cleanseactivity in Q4-05 resulted in a decrease in old NTL of 18,100 customersand 43,100 RGUs, a decrease of approximately 17,700 Telephone,26,600 Broadband and an increase of 1,300 net TV RGUs.

(2)          Review of inactivebacklog customers in the three months ended December 31, 2005 resulted inan adjustment to remove an additional 10,000 customers.

(3)          Customer churn iscalculated by taking the total disconnects during the month and dividing themby the average number of customers during the month. Average monthly churnduring a quarter is the average of the three monthly churn calculations withinthe quarter.

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(4)          Each telephone,television and broadband internet subscriber directly connected to our networkcounts as one RGU. Accordingly, a subscriber who receives both telephone andtelevision service counts as two RGUs. RGUs may include subscribers receivingsome services for free or at a reduced rate in connection with incentiveoffers.

(5)          Dial-up internetcustomers exclude metered customers who have not used the service within thelast 30 days.

(6)          The cable monthlyaverage revenue per user, or cable ARPU, is calculated on a quarterly basis bydividing total revenue generated from the provision of telephone, televisionand internet services to customers who are directly connected to our network inthat period, exclusive of VAT, by the average number of customers directlyconnected to our network in that period, divided by three.

***ContentSegment***

The summary results of operationsof our Content segment were as follows (in millions):

| ** **                                    | ** ** | **Three months  ended  September 30** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| ** **                                    | ** ** | **Actual**                                      | ** ** | **Pro forma** | ** ** |
| Revenue                                       |       | £                                          | 79.4       |   |   | £ | 88.1 |   |   |
| Inter segment  revenue                        |       | 5.9                                             |       |   | 5.4 |   |   |
| Segment OCF                                   |       | 5.5                                             |       |   | 7.8 |   |   |
| Depreciation,  amortization and other charges |       | (0.2                                            | )          |   | (6.7 | ) |   |
| Operating income                              |       | £                                          | 5.3        |   |   | £ | 1.1 |   |   |

 

*Revenue*

For the three months ended September 30, 2006, revenuein the Content segment decreased by 9.9% to £79.4 million from £88.1 million ona pro forma basis for the three months ended September 30, 2005. Thisdecrease is driven largely by decreased revenue in sit-up of £10.0 million dueto increased competition from other transactional TV channels and heightenedcompetition in the retail market. Increased revenue from Flextech of £1.1million was due to an increase in Flextech’s share of the total TV advertisingmarket, and increased subscription revenue arising from contractual price increases.

*SegmentOCF*

For the three months ended September 30, 2006, Contentsegment OCF decreased by 29.5% to £5.5 million from £7.8 million on a pro formabasis for the three months ended September 30, 2005. The decrease in Contentsegment OCF is primarily due to the decreased gross margin from sit-up togetherwith increased selling, general and administrative expenses at Flextech.

***Mobile Segment***

Virgin Mobile was acquiredon July 4, 2006, and its results of operations have been consolidated fromthat date. Total Mobile segment revenue for the period since acquisition to September 30,2006 was £140.4 million, of which £132.5 million was service revenue and £7.9million was equipment revenue. Equipment revenue is stated net of discountsearned through service usage. Mobile segment OCF was £16.0 million for theperiod since acquisition.

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*Summarystatistics*

Selected statistics forVirgin Mobile since acquisition are set forth in the table below:

| ** **                          | ** ** | **Three months ended  September 30,  2006** | ** **  |
|-------------------------------------|------------|--------------------------------------------------|-------------|
| Opening active  customers(1)        |       |                                             | 4,389,000   |   |   |
| Net customer  additions             |       |                                             | 122,700     |   |   |
| Closing active  customers           |       |                                             | 4,511,700   |   |   |
| Mobile average  revenue per user(2) |       |                                             | £10.28 |   |   |
| ARPU calculation:                   |       |                                             |        |   |   |
| Mobile revenue  (millions)          |       |                                             | £132.5 |   |   |
| Average customers                   |       |                                             | 4,294,800   |   |   |

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(1)          Prepay customers aredefined as active customers if they have made an outbound event in thepreceding 90 days. Contract customers are defined as active customers if theyhave been provisioned and have not been disconnected.

(2)          Mobile monthly averagerevenue per user is calculated on service revenue for the period sinceacquisition divided by the average active customers for the period sinceacquisition, divided by three.

***Ninemonths ended September 30, 2006 and 2005***

**HistoricalResults from Continuing Operations**

*Revenue*

For the nine months ended September 30, 2006,consolidated revenue increased by 72.3% to £2,520.6 million from £1,463.0million for the nine months ended September 30, 2005. This increase isprimarily due to the reverse acquisition of Telewest and the inclusion of itsrevenues from March 3, 2006, and to the acquisition of Virgin Mobile andthe inclusion of its revenues from July 4, 2006.

*Expenses*

*Operatingcosts.**  *Forthe nine months ended September 30, 2006, operating costs, includingnetwork expenses, increased by 76.2% to £1,062.4 million from£603.1 million for the three months ended September 30, 2005. Thisincrease is primarily attributable to the reverse acquisition of Telewest andthe acquisition of Virgin Mobile. Operating costs as a percentage of revenueincreased slightly to 42.1% for the nine months ended September 30, 2006,from 41.2% for the same period in 2005, in part due to the inclusion of theContent and Mobile segments subsequent to their acquisitions which have lower margins than our Cable segment.

*Selling,general and administrative expenses.**  *For the nine months ended September 30,2006, selling, general and administrative expenses increased by 81.0% to £648.7million from £358.3 million for the nine months ended September 30,2005. This increase is primarily attributable to the reverse acquisition ofTelewest and the acquisition of Virgin Mobile. Selling, general andadministrative expenses as a percentage of revenue increased to 25.7% for thenine months ended September 30, 2006, from 24.5% for the same period in2005 due to costs incurred in connection with the integration of NTL andTelewest during the nine months ended September 30, 2006.

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*Othercharges*

Other charges of £51.4million in the nine months ended September 30, 2006 relate primarily toemployee termination costs and lease exit costs in connection with ourrestructuring programs initiated in respect of the reverse acquisition ofTelewest. Other charges of £2.4 million in the nine months ended September 30,2005 mainly related to restructuring charges incurred in connection with ourcall center consolidation program and lease exit costs under our historicalprograms.

The following tablessummarize our historical restructuring provisions and the restructuring provisionsresulting from the reverse acquisition of Telewest at September 30, 2006(in millions): 

| **Historical Restructuring Provisions** | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  December 31, 2005                  |       |       | £     | —                                                          |       |                   | £     | 45.3      |       | £ | 45.3 |   |
| Charged to  expense                               |       |       | —     |                                                            |       | 3.0                    |       | 3.0       |       |
| Utilized                                          |       |       | —     |                                                            |       | (5.7                   | )          | (5.7      | )          |
| Balance,  September 30, 2006                 |       |       | £     | —                                                          |       |                   | £     | 42.6      |       | £ | 42.6 |   |

 

| **Acquisition Restructuring Provisions**                         | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  December 31, 2005                                           |       |       | £     | —                                                          |       |                   | £     | —    |       | £ | — |   |
| Provisions  resulting from business acquisition recognised under EITF 95-3 |       |       | 34.8       |                                                            |       | 33.2                   |       | 68.0      |       |
| Amendments to  business acquisition related provision                      |       |       | —     |                                                            |       | 12.7                   |       | 12.7      |       |
| Charged to  expense                                                        |       |       | 28.3       |                                                            |       | 20.1                   |       | 48.4      |       |
| Utilized                                                                   |       |       | (43.1      | )                                                               |       | (2.2                   | )          | (45.3     | )          |
| Balance,  September 30, 2006                                          |       |       | £     | 20.0                                                            |       |                   | £     | 63.8      |       | £ | 83.8 |   |

 

*Depreciationexpense*

For the nine months ended September 30, 2006,depreciation expense increased to £591.2 million from £402.2 million forthe nine months ended September 30, 2005. This increase is primarilyattributable to the reverse acquisition of Telewest and related fair valueadjustment to the property and equipment acquired, and to the acquisition ofVirgin Mobile. Excluding the impact of the reverse acquisition of Telewest andthe acquisition of Virgin Mobile, depreciation expense has decreased due to theabsence of depreciation on some assets that became fully depreciated in 2005.

*Amortizationexpense*

For the nine months endedSeptember 30, 2006, amortization expense increased to £166.3 million from£82.3 million for the nine months ended September 30, 2005. The increasein amortization expense relates to additional intangible assets arising fromthe reverse acquisition of Telewest and the acquisition of Virgin Mobile.

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*Interest expense*

For the nine months ended September 30, 2006interest expense increased to £332.6 million from £180.2 million for thenine months ended September 30, 2005, primarily as a result of theadditional borrowing as a result of the reverse acquisition of Telewest and theacquisition of Virgin Mobile.

We paid gross cashinterest of £267.8 million for the nine months ended September 30, 2006,and £126.8 million for the nine months ended September 30, 2005. Theincrease in cash interest payments resulted from the effects of the new seniorcredit facility and senior bridge facility in respect of the reverseacquisition of Telewest and the acquisition of Virgin Mobile, and changes intiming of interest payments.

*Loss onextinguishment of debt*

The loss on extinguishmentof debt of £32.9 million in the nine months ended September 30, 2006relates primarily to the write off of deferred financing costs on the seniorcredit facility that was repaid upon completion of the refinancing of thereverse acquisition of Telewest. For the nine months ended September 30,2005 the loss on extinguishment of debt of £2.0 million related to theredemption of the floating rate senior notes due 2012 on July 15, 2005.

*Loss fromderivative instruments*

The loss from derivative instrumentsof £1.9 million in the nine months ended September 30, 2006 mainly relatesto the termination of derivative instruments in respect of the foreign currencytranche of the senior credit facility that was repaid upon completion of therefinancing for the reverse acquisition of Telewest.

*Foreign currencylosses*

The foreign currencylosses of £97.8 million in the nine months ended September 30, 2006 werelargely comprised of foreign exchange losses of £70.8 million on U.S. dollarforward purchase contracts that were entered into to hedge the repayment of theU.S. dollar denominated bridge facility. The repayment of approximately $3.1billion of this facility on June 19, 2006 resulted in an offsetting gainduring the period of £120.7 million that has been recorded as a component ofequity. For the nine months ended September 30, 2005, foreign currencytransaction losses were £29.9 million. These losses for the nine months ended September 30,2005 were primarily because of the effect of changes in the exchange rate onour U.S. dollar and euro denominated debt partially offset by unrealized gainsof £11.0 million arising from changes in the fair value of our foreign currencyforward contracts.

*Income tax benefit*

For the nine months ended September 30, 2006,income tax benefit was £10.8 million as compared with £8.7 million expensefor the same period in 2005.

For the nine months ended September 30,2006, the tax benefit of £10.8 million was comprised of federal taxes of £9.2million, and U.K. taxes of £1.6 million. The federal tax benefit isattributable to a current year US tax loss which is mainly derived from taxdeductions related to the senior bridge facility repaid on June 19, 2006.The tax benefit related to the release of a deferred tax liability set up in2005. The U.K. tax benefit related to amounts receivable in respect of thesurrender of U.K. tax losses arising in the current period to equityinvestments.

**Segment Information**

A description of the products and services, as well asyear-to-date financial data, for each segment can be found above in Note 14 tothe Consolidated Condensed Financial Statements.

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The segment results for the nine months ended September 30,2006 include the results of Telewest from March 3, 2006 (the acquisition date).The following discussion relates to the results of operations of each of ourCable and Content segments on a pro forma combined basis as if the reverseacquisition of Telewest had occurred at the beginning of the periods presentedand combine Telewest’s historical Content and sit-up segments into thecombined company’s Content segment. The pro forma data has been calculated on abasis consistent with the pro forma financial information filed under our Form8-K/A filed on May 10, 2006. We believe that a pro forma comparison of thesesegments is more relevant than a historic comparison as: (a) in respect of ourCable segment, the size of the acquired legacy Telewest cable business would obscureany meaningful discussion of changes in our cable business if viewed on ahistorical basis; and (b) we did not have a Content segment in the priorperiod. Comparative pro forma results of our Mobile segment have not beenpresented.

The reportable segments disclosed in this Form 10-Qare based on our management organizational structure as of September 30,2006. Future changes to this organizational structure may result in changes tothe reportable segments disclosed.

Segment operating incomebefore depreciation, amortization and other charges, which we refer to asSegment OCF, is management’s measure of segment profit as permitted under SFAS131, *“Disclosures about Segments of an Enterprise andRelated Information”.* Our management, including our chief executiveofficer who is our chief operating decision maker, considers Segment OCF as animportant indicator of the operational strength and performance of oursegments. Segment OCF excludes the impact of costs and expenses that do notdirectly affect our cash flows. Other charges, including restructuring charges,are also excluded from Segment OCF as management believes they are notcharacteristic of our underlying business operations.

***Cable Segment***

Thesummary pro forma combined results of operations of our Cable segment were asfollows (in millions):
|                                               | ** ** | **Nine months ended  September 30,** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| Revenue                                       |       | £                                              | 2,412.2    |   | £ | 2,405.8 |   |
| Inter segment  revenue                        |       | 1.8                                                 |       | 2.2 |   |
| Segment OCF                                   |       | 848.4                                               |       | 908.5 |   |
| Depreciation,  amortization and other charges |       | (858.3                                              | )          | (834.8 | ) |
| Operating (loss) income                       |       | £                                              | (9.9       | ) | £ | 73.7 |   |

 

*Revenue*

Ourpro forma Cable segment revenue by customer type for the nine months ended September 30,2006 and 2005 was as follows (in millions):

| ** **    | ** ** | **Nine months ended  September 30,** | ** ** |
|---------------|------------|-----------------------------------------------------|------------|
|               | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **Increase/  (Decrease)** | ** ** |
| Revenue:      |       |                                                |       |   |   |   |   |   |   |
| Consumer      |       | £                                              | 1,924.2    |   | £ | 1,896.2 |   |   | 1.5 | % |   |
| Business      |       | 488.0                                               |       | 509.6 |   |   | (4.2 | )% |   |
| Total revenue |       | £                                              | 2,412.2    |   | £ | 2,405.8 |   |   | 0.3 | % |   |

* *

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*Consumer:*   Forthe nine months ended September 30, 2006, pro forma revenue fromresidential customers increased by 1.5% to £1,924.2 million from £1,896.2 million for the nine months ended September 30,2005. This increase is driven largely by growth in the number of broadbandinternet subscribers together with television and telephony price rises offsetby lower telephony usage.

*Business:*   Forthe nine months ended September 30, 2006, pro forma revenue from businesscustomers decreased by 4.2% to £488.0 million from £509.6 million for the nine months ended September 30, 2005.This decrease is attributable to declines in telephony voice revenue and lowerwholesale and other contract revenue, partially offset by greater datainstallation and rental revenue.

*Segment OCF*

For the nine months ended September 30,2006, pro forma Cable segment OCF decreased by 6.6% to £848.4 million from £908.5 million for the nine months ended September 30,2005. The decrease in OCF is primarily due to increased selling, general andadministrative expenses, which included pre-acquisition charges of £20.9 million relating to the reverseacquisition of Telewest, consisting of legal and professional charges of £11.7 million and executive compensationcosts and insurance expenses of £9.2million along with integration costs incurred since the acquisition. Inaddition, share based compensation expense, marketing expense and bad debtexpense increased compared with the nine months ended September 30, 2005.

***Content Segment***

Thesummary pro forma combined results of operations of our Content segment were asfollows (in millions):
|                                               | ** ** | **Nine months  ended  September 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| Revenue                                       |       | £                                          | 245.4      |   | £ | 170.5 |   |
| Inter segment  revenue                        |       | 16.9                                            |       | 15.5 |   |
| Segment OCF                                   |       | 23.7                                            |       | 17.9 |   |
| Depreciation,  amortization and other charges |       | (13.7                                           | )          | (19.0 | ) |
| Operating income (loss)                       |       | £                                          | 10.0       |   | £ | (1.1 | ) |

 

*Revenue*

For the nine months ended September 30,2006, pro forma revenue in the Content segment increased by 43.9% to £245.4million from £170.5 million for thenine months ended September 30, 2005. This increase is driven largely bythe inclusion in the nine months ended September 30, 2006 of sit-up whichwas acquired by Telewest in May 2005, and contributed revenue of £144.4million in the first nine months of 2006. Increased revenue from Flextech of£12.0 million was principally due to an increased share of the TV advertisingrevenue market as a result of the cumulative effect of the relative strength ofthe viewing performance of the Flextech TV channels, and increased subscriptionrevenue arising from contractual price increases.

*Segment OCF*

For the nine months ended September 30,2006, pro forma Content segment OCF increased by 32.4% to £23.7 million from £17.9 million for the ninemonths ended September 30, 2005. The increase in pro forma Content  segment OCF is primarily due to the increasein revenue in Flextech partially offset by increased marketing costs, togetherwith the inclusion of sit-up.

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***Mobile Segment***

Virgin Mobile was acquired on July 4, 2006, andits results of operations have been consolidated from that date. Total Mobilesegment revenue for the period since acquisition to September 30, 2006 was£140.4 million, of which £132.5 million was service revenue and £7.9 millionwas equipment revenue. Equipment revenue is stated net of discounts earnedthrough service usage. Mobile segment OCF was £16.0 million for the periodsince acquisition.

*Summary statistics*

Selected statisticsfor Virgin Mobile since acquisition are set forth in the table below:
|                                     | ** ** | **Three months ended  September 30,  2006** | ** **  |
|-------------------------------------|------------|--------------------------------------------------|-------------|
| Opening active  customers(1)        |       |                                             | 4,389,000   |   |   |
| Net customer  additions             |       |                                             | 122,700     |   |   |
| Closing active  customers           |       |                                             | 4,511,700   |   |   |
| Mobile average  revenue per user(2) |       |                                             | £10.28 |   |   |
| ARPU calculation:                   |       |                                             |        |   |   |
| Mobile revenue  (millions)          |       |                                             | £132.5 |   |   |
| Average customers                   |       |                                             | 4,294,800   |   |   |

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(1)          Prepay customers aredefined as active customers if they have made an outbound event in thepreceding 90 days. Contract customers are defined as active customers if theyhave been provisioned and have not been disconnected.

(2)          Mobile monthly averagerevenue per user is calculated on service revenue for the period sinceacquisition, divided by the average active customers for the period sinceacquisition, divided by three.

**Statement of CashFlows**

Cash flow information provided below is for ourcontinuing operations.

*NineMonths ended September 30, 2006 and 2005*

For the nine months ended September 30, 2006,cash provided by operating activities increased to £512.2 million from £239.6 million for the ninemonths ended September 30, 2005. This increase is primarily attributableto the reverse acquisition of Telewest and the acquisition of Virgin Mobile,and an improvement in working capital offset by an increase in cash paid forinterest. For the nine months ended September 30, 2006, cash paid forinterest, exclusive of amounts capitalized, increased to £267.5 million from £126.8 million duringthe same period in 2005. This increase resulted from the higher levels ofborrowings and repayment of existing facilities following the reverseacquisition of Telewest and the acquisition of Virgin Mobile.

For the nine months ended September 30, 2006,cash used in investing activities was £2,831.4 million compared with cashprovided by investing activities of £1,243.7 million for the nine months ended September 30,2005. The cash used in investing activities in the nine months ended September 30,2006 includes £2,024.2 million for the reverse acquisition of Telewest, net ofcash acquired of £294.9 million, and£423.5 million for the acquisition of Virgin Mobile, net of cash acquired of£10.0 million. The cash provided by investing activities in the nine monthsended September 30, 2005 includes £1.229 billion from the sale of our Broadcastoperations. Purchases of fixed assets increased to £397.0 million for the ninemonths ended September 30, 2006 from £216.3 million for the same period in 2005 primarily because of thetiming of cash payments and the reverse acquisition of Telewest.

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Cash provided by financingactivities for the nine months ended September 30, 2006 was £1,889.3 million compared to cash used infinancing activities of £891.5million in the nine months ended September 30, 2005. The principal sourcesof cash provided by financing activities for the nine months ended September 30,2006 were the new £5.3 billion senior credit facility and the $550 millionsenior notes due 2016. The principal uses of cash were the repayment of ourprevious senior credit and bridge facilities. For the nine months ended September 30,2005, cash used in financing activities related to the repurchases of ourcommon stock in the open market for £114.0 million and the prepayment of£781.7 million on our senior credit facility.

**LIQUIDITY AND CAPITAL RESOURCES**

As of September 30,2006, we had £6,207.0 million of debt outstanding, compared to £2,280.0 millionas of December 31, 2005 and £2,263.6 million as of September 30,2005, and £302.2 million of cash and cash equivalents, compared to £832.1million and £806.2 million as of December 31, 2005 and September 30,2005, respectively. The increase in debt is primarily attributable to thereverse acquisition of Telewest in March 2006 and the acquisition ofVirgin Mobile in July 2006. Our business is capital intensive, we arehighly leveraged, and we have historically incurred operating losses andnegative cash flow, partly as a result of our construction costs, operatingexpenditures and interest costs.

We require significantamounts of capital to connect customers to our network, expand and upgrade ournetwork, offer new services and integrate our billing systems and customerdatabases.

We must also regularlyservice interest payments with cash flows from operations. Our ability tosustain operations, meet financial covenants under our indebtedness, and makerequired payments on our indebtedness could be impaired if we are unable tomaintain or achieve various financial performance measures. Our ability toservice our capital needs, to service our obligations under our indebtednessand to fund our ongoing operations will depend upon our ability to generatecash.

Although we expect togenerate positive cash flow in the future, we cannot assure you that this willbe the case. We believe that our cash on hand, together with cash fromoperations and unused credit facility, will be sufficient for our cashrequirements through at least September 30, 2007. However, our cashrequirements after September 30, 2007 may exceed these sources of cash.This may require that we obtain additional financing in excess of the financingincurred in the recent refinancing transaction. We may not be able to obtainfinancing at all, or on favorable terms, or we may be contractually preventedby the terms of our senior notes or our senior credit facility from incurringadditional indebtedness.

We are a holding companywith no independent operations or significant assets other than our investmentsin our subsidiaries. As a result, we will depend upon the receipt of sufficientfunds from our subsidiaries to meet our obligations. In addition, the terms ofour and our subsidiaries’ existing and future indebtedness and the laws of thejurisdictions under which those subsidiaries are organized limit the payment ofdividends, loan repayments and other distributions to us under manycircumstances.

Our debt agreements andthe debt agreements of some of our subsidiaries contain restrictions on ourability to transfer cash between groups of our subsidiaries. As a result ofthese restrictions, although our overall liquidity may be sufficient to satisfyour obligations, we may be limited by covenants in some of our debt agreementsfrom transferring cash to other subsidiaries that might require funds. Inaddition, cross default provisions in our other indebtedness may be triggeredif we default on any of these debt agreements.

*Senior Credit Facility*

During the year, we entered into a new senior creditfacility in an aggregate principal sterling equivalent amount of £5.275 billion,comprising a £3.35 billion 5 year amortizing Tranche A term loan facility, a£175 million 5 year amortizing Tranche A1 term loan facility, a £300 million 61⁄2year bullet 

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Tranche B1 term loanfacility, a £351 million 61⁄2 year bullet Tranche B2 term loan facility, a €500million 61⁄2 year bullet Tranche B3 term loan facility, a $650 million 61⁄2 yearbullet Tranche B4 term loan facility, a £300 million 7 year bullet Tranche Cterm credit facility and a £100 million 5 year multi-currency revolving credit facility.

The senior credit facility (other than for Tranche C)has the benefit of a full and unconditional senior secured guarantee from NTLCable PLC as well as first priority pledges of the shares and assets ofsubstantially all of the operating subsidiaries of NTL Investment HoldingsLimited (“NTLIH”) and of receivables arising under any intercompany loans tothose subsidiaries. The senior secured guarantee of NTL Cable PLC is secured bya first priority pledge of the entire capital stock of NTLIH and the receivablesunder any intercompany loans from NTL Cable PLC to NTLIH. The guarantee of theTranche C of the senior credit facility will share in the security of NTL CablePLC granted to the senior credit facility, but will receive proceeds only afterthe other tranches and will not benefit from guarantees or security granted byother members of the group.

Remainingprincipal under Tranches A and A1 is subject to repayment each six months asfollows
| Date                    | ** ** | ** ** | ** **  | **Amount** | ** ** |
|-------------------------|------------|------------|-------------|------------|------------|
| 30  September 2007 |       | £     | 124 million |       |
| 31  March 2008     |       | £     | 237 million |       |
| 30  September 2008 |       | £     | 237 million |       |
| 31  March 2009     |       | £     | 265 million |       |
| 30  September 2009 |       | £     | 475 million |       |
| 31  March 2010     |       | £     | 527 million |       |
| 30  September 2010 |       | £     | 580 million |       |
| Final maturity date     |       | £     | 967 million |       |

 

The annual rate of interest payable under our newsenior credit facility is the sum of (i) the London Intrabank Offer Rate(LIBOR), US LIBOR or European Intrabank Offer Rate (EURIBOR), as applicable,plus (ii) the applicable interest margin and the applicable cost ofcomplying with any reserve requirement.

The applicableinterest margin for Tranche A, A1 and the revolving facility depends upon thenet leverage ratio then in effect as set forth below:
| Leverage Ratio                                   | ** ** | ** ** | ** ** | **Margin** | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|
| Less than 3.00:1                                      |       |       | 1.250      | %          |       |
| Greater than or  equal to 3.00:1 but less than 3.40:1 |       |       | 1.375      | %          |       |
| Greater than or  equal to 3.40:1 but less than 3.80:1 |       |       | 1.500      | %          |       |
| Greater than or  equal to 3.80:1 but less than 4.20:1 |       |       | 1.625      | %          |       |
| Greater than or  equal to 4.20:1 but less than 4.50:1 |       |       | 1.750      | %          |       |
| Greater than or  equal to 4.50:1 but less than 4.80:1 |       |       | 1.875      | %          |       |
| Greater than or  equal to 4.80:1 but less than 5.00:1 |       |       | 2.125      | %          |       |
| Greater than or equal to  5.00:1                      |       |       | 2.250      | %          |       |

 

The applicableinterest margin for Tranche B and Tranche C is as follows:
| Facility | ** ** | ** ** | ** ** | **Margin** | ** ** |
|----------|------------|------------|------------|------------|------------|
| B1       |       |       | 2.125      | %          |       |
| B2       |       |       | 2.125      | %          |       |
| B3       |       |       | 2.000      | %          |       |
| B4       |       |       | 2.000      | %          |       |
| C   |       |       | 2.75       | %          |       |

 

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*Senior Notes*

On July 25, 2006, NTL Cable PLC issued U.S.dollar denominated 9.125% senior notes due 2016 with principal amountoutstanding of $550 million. The senior notes due 2016 are unsecured seniorobligations of NTL Cable PLC and rank pari passu with NTL Cable’s outstandingsenior notes due 2014. The senior notes due 2016 bear interest at an annualrate of 9.125% payable on February 15 and August 15 of each year,beginning February 15, 2007. The senior notes due 2016 mature on August 15,2016 and are guaranteed by NTL Incorporated, NTL:Telewest LLC, NTLIH andcertain other intermediate holding companies of NTL.

The U.S. dollardenominated 8.75% senior notes due 2014 were issued by NTL Cable PLC on April 13,2004 and have a principal amount outstanding of $425 million. The sterlingdenominated 9.75% senior notes due 2014 were issued by NTL Cable PLC on April 13,2004 and have a principal amount outstanding of £375 million. The eurodenominated 8.75% senior notes due 2014 were issued by NTL Cable PLC on April 13,2004 and have a principal amount outstanding of €225million. The senior notes due 2014 mature onApril 15, 2014 and are guaranteed by NTL Incorporated, NTL:Telewest LLC,NTLIH and certain of the intermediate holding companies in the group.

*Restrictions underour Existing Debt Agreements*

The agreements governingthe senior notes and the senior credit facility significantly and, in somecases absolutely, restrict our ability and the ability of most of oursubsidiaries to:

·       incuror guarantee additional indebtedness;

·       paydividends or make other distributions, or redeem or repurchase equity interestsor subordinated obligations;

·       makeinvestments;

·       sellassets, including the capital stock of subsidiaries;

·       enterinto sale/leaseback transactions;

·       createliens;

·       enterinto agreements that restrict the restricted subsidiaries’ ability to paydividends, transfer assets or make intercompany loans;

·       mergeor consolidate or transfer all or substantially all of their assets; and

·       enter into transactionswith affiliates.

***Debt Ratings***

To access public debt capital markets, we rely oncredit rating agencies to assign corporate credit ratings. A rating is not arecommendation by the rating agency to buy, sell or hold our securities. Acredit rating agency may change or withdraw our ratings based on its assessmentof our current and future ability to meet interest and principal repaymentobligations. Lower credit ratings generally result in higher borrowing costsand reduced access to debt capital markets. The corporate debt ratings andoutlook currently assigned to our securities by the rating agencies engaged byus are as follows:
|                                      | ** ** | **Corporate  Rating** | ** ** | **Outlook** | ** ** |
|--------------------------------------|------------|-----------------------|------------|-------------|------------|
| Moody’s Investors  Service Inc. |       |                  | Ba3        |        |       | Stable |   |
| Standard &  Poor’s     |       |                  | B+         |        |       | Positive |   |

 

 

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***Cash Dividend***

On August 28, 2006,our board of directors approved and declared the payment of a regular quarterlycash dividend of $0.02 per share on September 20, 2006 to stockholders ofrecord as of September 12, 2006, totaling £3.5 million. Future payments ofregular quarterly dividends by us are at the discretion of our board ofdirectors and will be subject to our future needs and uses of free cash flow,which could include investments in operations, the repayment of debt, and sharerepurchase programs.

**CONTRACTUALOBLIGATIONS AND COMMERCIAL COMMITMENTS**

The following tableincludes aggregate information about our contractual obligations as of September 30,2006, and the periods in which payments are due (in millions).
|                                  | ** ** | ** ** | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------|------------|------------|------------|-------------------------------------------|------------|
| **Contractual Obligations** | ** ** | ** ** | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1-3  years** | ** ** | **3-5  years** | ** ** | **More than  5 years** | ** ** |
| Long-Term Debt  Obligations      |       | £     | 6,096.3    |                                      | £     | 127.2 |   | £ | 1,215.7 |   | £ | 2,074.8 |   |   | £ | 2,678.6 |   |   |
| Capital Lease  Obligations       |       | 196.8      |       | 36.7                                      |       | 38.1 |   | 29.4 |   |   | 92.6 |   |   |
| Operating Lease  Obligations     |       | 406.4      |       | 53.8                                      |       | 88.6 |   | 72.5 |   |   | 191.5 |   |   |
| Purchase  Obligations            |       | 421.6      |       | 331.0                                     |       | 33.2 |   | 17.0 |   |   | 40.4 |   |   |
| Interest  Obligations            |       | 2,289.4    |       | 460.7                                     |       | 839.8 |   | 579.2 |   |   | 409.7 |   |   |
| Total                            |       | £     | 9,410.5    |                                      | £     | 1,009.4 |   | £ | 2,215.4 |   | £ | 2,772.9 |   |   | £ | 3,412.8 |   |   |
|                                  |            |            |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The following table includes information about ourcommercial commitments as of September 30, 2006. Commercial commitmentsare items that we could be obligated to pay in the future. They are notrequired to be included in the consolidated balance sheet (in millions).
|                                            | ** ** | ** ** | ** ** | **Amount of Commitment  Expiration per Period** | ** ** |
|--------------------------------------------|------------|------------|------------|---------------------------------------------------------------------|------------|
| **Other Commercial Commitments** | ** ** | ** ** | ** ** | **Total**                                                           | ** ** | **Less  than  1 year** | ** ** | **1-3  years** | ** ** | **3-5  years** | ** ** | **More  than  5 years** | ** ** |
| Guarantees                                 |       | £     | 24.0       |                                                                |       | £ | 4.9 |   |   | £ | 11.2 |   |   | £ | — |   |   |   | £ | 7.9 |   |   |
| Lines of Credit                            |       | 1.5        |       |                                                                | —     |   |   | 0.8 |   |   | — |   |   |   | 0.7 |   |   |
| Standby Letters  of Credit                 |       | —     |       |                                                                | —     |   |   | — |   |   | — |   |   |   | — |   |   |
| Standby  Repurchase Obligations            |       | —     |       |                                                                | —     |   |   | — |   |   | — |   |   |   | — |   |   |
| Other Commercial  Commitments              |       | —     |       |                                                                | —     |   |   | — |   |   | — |   |   |   | — |   |   |
| Total Commercial  Commitments              |       | £     | 25.5       |                                                                |       | £ | 4.9 |   |   | £ | 12.0 |   |   | £ | — |   |   |   | £ | 8.6 |   |   |
|                                            |            |            |            |                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Guarantees relate toperformance bonds provided by banks on our behalf as part of our contractualobligations. The fair value of the guarantees has been calculated by referenceto the monetary value of each bond.

**ITEM 3.**                QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, includingchanges in foreign currency exchange rates and interest rates. Market risk isthe potential loss arising from adverse changes in market rates and prices,such as foreign currency exchange and interest rates. As some of ourindebtedness accrues interest at variable rates, we have exposure to volatilityin future cash flows and earnings associated with variable interest ratepayments.

Also, all of our revenues and a substantial portion ofour operating costs are earned and paid in pounds sterling but we pay interestand principal obligations on some of our indebtedness in U.S. dollars andeuros. As of September 30, 2006, £866.2 million, or 14.0% of our long-termdebt, was denominated in U.S. dollars and £490.1 million, or 7.9%, ofour long-term debt was denominated in euros. As a result, we 

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have exposure tovolatility in future cash flows and earnings associated with changes in foreignexchange rates on payments of principal and interest on a portion of ourindebtedness.

To mitigate the risk from these exposures, we haveimplemented a cash flow hedging program. The objective of this program is toreduce the volatility of our cash flows and earnings caused by changes inunderlying rates. To achieve this objective we have entered into a number ofderivative instruments. The derivative instruments utilized comprise interestrate swaps, cross-currency interest rate swaps and foreign currencyforward contracts. We do not enter into derivative instruments for trading orspeculative purposes.

The fair market values of long-term fixed interestrate debt and the amount of future interest payments on variable interest ratedebt are subject to interest rate risk.

The following table provides information as of September 30,2006 about our long-term fixed and variable interest rate debt that issensitive to changes in interest rates and foreign currency exchange rates(in millions).
|                                               | ** ** | **Year ending December 31,** | ** ** | ** ** | ** ** | ** **                | ** ** | **Fair Value  September 30,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------|------------|------------|------------|---------------------------|------------|-----------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                    | ** ** | **2007**   | ** ** | **2008**                  | ** ** | **2009**                                | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **2006** | ** ** |
| **Long-term debt including  current portion** | ** ** |                                        | ** ** | ** ** |       | ** **                | ** ** | ** **                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   |
| US Dollars                                    |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |
| Fixed rate                                    |       |                                        | —     | ** ** |       | —                    |       | —                                  |       | — |   | — |   | $ | 975.0 |   | $ | 975.0 |   |   | $ | 1,008.8 | ** ** |   |
| Average interest rate                         |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   | 8.96 | % |   |   |   |   | ** ** |   |
| Average forward exchange rate                 |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   | 0.53 |   |   |   |   |   | ** ** |   |
| Pound Sterling                                |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |
| Fixed rate                                    |       |                                        | —     | ** ** |       | —                    |       | —                                  |       | — |   | — |   | £ | 375.0 |   | £ | 375.0 |   |   | £ | 386.3 | ** ** |   |
| Average interest rate                         |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   | 9.75 | % |   |   |   |   | ** ** |   |
| Euro                                          |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |
| Fixed rate                                    |       |                                        | —     | ** ** |       | —                    |       | —                                  |       | — |   | — |   | € | 225.0 |   | € | 225.0 |   |   | € | 235.1 | ** ** |   |
| Average interest rate                         |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   | 8.75 | % |   |   |   |   | ** ** |   |
| Average forward exchange rate                 |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   | 0.72 |   |   |   |   |   | ** ** |   |
| Pound Sterling                                |       |                                        |       | ** ** |       |                      |       |                                    |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |
| Variable Rate                                 |       |                                        | —     | ** ** |       | £                    | 124.0      |                                    | £     | 474.0 |   | £ | 740.0 |   | £ | 1,107.0 |   | £ | 2,597.0 |   | £ | 5,042.0 |   |   | £ | 5,042.0 | ** ** |   |
| Average interest  rate                        |       |                                        |       | ** ** |       | Libor  plus  1.25 - 2.25% |       | Libor  plus  1.25 - 2.25%               |       | Libor  plus  1.25 - 2.25% |   | Libor   plus  1.25 - 2.25% |   | Libor  plus1.25 - 2.75% |   |   |   |   |   | ** ** |   |
|                                               |            |                                             |            |            |            |                           |            |                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**ITEM 4.**                CONTROLSAND PROCEDURES

(a)*           DisclosureControls and Procedures*.

Our management,with the participation of our chief executive officer and chief financialofficer, has evaluated the effectiveness of our disclosure controls andprocedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended, which we refer to as theExchange Act) as of the end of the period covered by this report. Based on suchevaluation, our chief executive officer and chief financial officer haveconcluded that, as of the end of such period, these controls and procedures areeffective to ensure that information required to be disclosed by us in thereports we file or submit under the Exchange Act is recorded, processed,summarized, and reported within the time periods specified in the Securitiesand Exchange Commission’s rules and forms. These disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by us in the reports that wefile or submit is accumulated and 

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communicatedto our management, including our chief executive officer and chief financialofficer, as appropriate to allow timely decisions regarding requireddisclosure.

(b)*          Changes inInternal Control Over Financial Reporting*.

On March 3, 2006, we completed the reverseacquisition of Telewest and on July 4, 2006, we completed the acquisition ofVirgin Mobile. As a consequence of our integration of these acquisitions, we havemade and expect to make further material changes to our internal control overfinancial reporting. Other than as stated above, there were no changes in ourinternal control over financial reporting (as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the fiscal quarter to whichthis report relates that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

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**PART II—OTHERINFORMATION**

**ITEM 1.**                LEGALPROCEEDINGS

We are involved indisputes and litigation arising in the ordinary course of our business. We arealso involved in various disputes and legal proceedings, none of which is amaterial pending legal proceeding that exclusive of interest and costs, isanticipated to exceed 10% of our and our subsidiaries’ current assets on aconsolidated basis, or is otherwise reportable in response to this item.

**ITEM 1A.**        RISKFACTORS

Other than with respect to the risk factor set forthbelow, since December 31, 2005, there have been no material changes in therisk factors discussed under “Risk Factors” and elsewhere in our Form 10-Kthat was filed with the SEC on February 28, 2006 and the Form 10-Kof NTL Holdings Inc. that was filed with the SEC on March 1, 2006.

***We do not insure the underground portion of our cablenetwork and various pavement-based electronics associated with our cablenetwork.***

We obtain insurance of thetype and in the amounts that we believe are customary for similar companies.Consistent with this practice, we do not insure the underground portion of ourcable network or various pavement-based electronics associated with our cablenetwork. Almost all of our cable network is constructed underground. As a result,any catastrophe that affects our underground cable network or ourpavement-based electronics could prevent us from providing services to ourcustomers and result in substantial uninsured losses.

**ITEM 2.**                UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

**ITEM 3.**                DEFAULTSUPON SENIOR SECURITIES

None.

**ITEM 4.**                SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submittedto a vote of our security holders in the quarter ended September 30, 2006.

**ITEM 5.**                OTHERINFORMATION

None.

**ITEM 6.**                EXHIBITS

| 3.1 |   | Second restated certificate of incorporation of NTL  Incorporated (Incorporated by reference to NTL Incorporated’s Current Report  on Form 8-K filed with the Securities and Exchange Commission on March 6, 2006).

  |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2 |   | Restated by-laws of NTL Incorporated (Incorporated  by reference to NTL Incorporated’s Current Report on Form 8-K filed with the  Securities and Exchange Commission on March 6, 2006).

                              |

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| 4.1        |   | Indenture, dated as of July 25, 2006, among NTL  Cable PLC, NTL Incorporated, the Intermediate Guarantors (as defined in the  Indenture), NTL Investment Holdings Limited, The Bank of New York as trustee  and paying agent and The Bank of New York (Luxembourg) S.A. as Luxembourg  paying agent (Incorporated by reference to NTL Incoporated’s Current Report  on Form 8-K as filed with the Securities and Exchange Commission  on July 26, 2006).

                                                                                                                   |
|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.2        |   | First Supplemental Indenture, dated as of October 5,  2006, among NTL Cable PLC, the Guarantors (as defined in the Indenture), and  The Bank of New York as trustee.*

                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.3        |   | Second Supplemental Indenture, dated as of October 30,  2006, among NTL Cable PLC, the Guarantors (as defined in the Indenture), and  The Bank of New York as trustee.*

                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.4        |   | Senior Guarantee, dated as of October 30, 2006,  among NTL Holdings Inc., NTL (UK) Group, Inc., NTL Communications Limited,  NTL Incorporated and NTL: Telewest LLC (Incorporated by reference to NTL  Incorporated’s Current Report on Form 8 K as filed with the Securities and  Exchange Commission on October 30, 2006).

                                                                                                                                                                                                                                                              |
| 10.2       |   | Amended and Restated Employment Agreement, and  Restricted Stock Agreement, entered into by and between NTL Incorporated and  James Mooney, dated as of July 5, 2006 (Incorporated by reference to NTL  Incorporated’s Current Report on Form 8-K as filed with the  Securities and Exchange Commission on July 7, 2006).

                                                                                                                                                                                                                                                  |
| 10.3  |   | Form of Incentive Stock Option Notice  (Incorporated by reference to NTL Incorporated’s Current Report on  Form 8-K as filed with the Securities and Exchange Commission on  July 12, 2006, which also shows the relevant Executive Officers and the  awards made).

                                                                                                                                                                                                                                                                                                        |
| 10.4       |   | Form of Non-qualified Stock Option Notice  (Incorporated by reference to NTL Incorporated’s Current Report on  Form 8-K as filed with the Securities and Exchange Commission on  July 12, 2006, which also shows the relevant Executive Officers and the  awards made).

                                                                                                                                                                                                                                                                                                    |
| 10.5       |   | Form of Restricted Stock Unit Agreement  (Incorporated by reference to NTL Incorporated’s Current Report on  Form 8-K as filed with the Securities and Exchange Commission on  July 12, 2006, which also shows the relevant Executive Officers and the  awards made).

                                                                                                                                                                                                                                                                                                      |
| 10.6       |   | Senior Facilities Agreement dated 3 March 2006  as amended and restated on 22 May 2006 and 10 July 2006  between, among others, the Company, certain of its subsidiaries (as Borrowers  and/or Guarantors) and Deutsche Bank AG, London Branch, J.P. Morgan Plc, The  Royal Bank of Scotland Plc and Goldman Sachs International (as Bookrunners  and Mandated Lead Arrangers) (excluding schedules) (Incorporated by reference  to NTL Incorporated’s Current Report on Form 8-K as filed with the  Securities and Exchange Commission on July 13, 2006).

  |
| 10.7       |   | Group Intercreditor Deed dated 3 March 2006 as  amended and restated on 13 June 2006 and 10 July 2006 between,  among others, Deutsche Bank AG, London Branch as Facility Agent and Security  Trustee and the Senior Lenders, the Intergroup Debtors and the Intergroup  Creditors names therein (excluding schedules) (Incorporated by reference to  NTL Incorporated’s Current Report on Form 8-K as filed with the  Securities and Exchange Commission on July 13, 2006).

                                                                                |

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| 10.8  |   | Deed of Accession dated July 18, 2006 between  NTL Investment Holdings Limited and Deutsche Bank AG, London Branch as C  Facility Lender and as Facility Agent (Incorporated by reference to NTL  Incorporated’s Current Report on Form 8-K as filed with the  Securities and Exchange Commission on July 21, 2006).

                                 |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.9  |   | Deed of Accession dated July 18, 2006 among NTL  Investment Holdings Limited, JPMorgan Chase Bank as C Facility Lender and  Deutsche Bank AG, London Branch as Facility Agent (Incorporated by reference  to NTL Incorporated’s Current Report on Form 8-K as filed with the  Securities and Exchange Commission on July 21, 2006).

                  |
| 10.10 |   | Deed of Accession dated July 18, 2006 among NTL  Investment Holdings Limited, Goldman Sachs Credit Partners, L.P. as C  Facility Lender and Deutsche Bank AG, London Branch as Facility Agent  (Incorporated by reference to NTL Incorporated’s Current Report on Form 8-K  as filed with the Securities and Exchange Commission on July 21, 2006).

  |
| 10.11 |   | Deed of Accession dated July 18, 2006 among NTL  Investment Holdings Limited, The Royal Bank of Scotland plc as C Facility  Lender and Deutsche Bank AG, London Branch as Facility Agent (Incorporated by  reference to NTL Incorporated’s Current Report on Form 8-K as  filed with the Securities and Exchange Commission on July 21, 2006).

       |
| 10.12 |   | Form of Indemnity Agreement entered into with  Directors and Executive Officers (Incorporated by reference to NTL  Incorporated’s Current Report on Form 8-K as filed with the  Securities and Exchange Commission on October 2, 2006).

                                                                                                              |
| 31.1  |   | Certification of Chief Executive Officer, pursuant  to Rule 13(a)-14(a) and Rule 15d-14(a) of the  Exchange Act.*

                                                                                                                                                                                                                                    |
| 31.2  |   | Certification of Chief Financial Officer, pursuant  to Rule 13(a)-14(a) and Rule 15d-14(a) of the  Exchange Act.*

                                                                                                                                                                                                                                    |
| 32.1  |   | Certifications of Chief Executive Officer and Chief  Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant  to Section 906 of the Sarbanes Oxley Act of 2002.*

                                                                                                                                                                              |

 

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*                    Filed herewith

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15 (d) of the SecuritiesExchange Act of 1934, the registrants have duly caused this report to be signedon their behalf by the undersigned thereunto duly authorized.

|                              | NTL INCORPORATED

  |
|------------------------------|--------------------------|
| Date: November 9, 2006  | By:                      | /s/ STEPHEN A.  BURCH |
|                         |                     | Stephen A. Burch |
|                         | * *                 | *Chief Executive Officer* |
| Date: November 9,  2006 | By:                      | /s/ JACQUES KERREST |
|                         |                     | Jacques Kerrest |
|                         | * *                 | *Chief Financial Officer* |

 

|                              | NTL INVESTMENT HOLDINGS  LIMITED

  |
|------------------------------|------------------------------------------|
| Date: November 9, 2006  | By:                                      | /s/ STEPHEN A.  BURCH |
|                         |                                     | Stephen A. Burch |
|                         | * *                                 | *Chief Executive Officer* |
| Date: November 9,  2006 | By:                                      | /s/ JACQUES KERREST |
|                         |                                     | Jacques Kerrest |
|                         | * *                                 | *Chief Financial Officer* |

 

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