Examination of Witnesses (Questions 311-319)|
TUESDAY 12 FEBRUARY 2002
Chairman: Gentlemen, we welcome you here
today as we continue this inquiry into the preparations for the
311. I was listening to In Business while
driving to Lichfield the other week and the whole programme was
dedicated to the state of cable in the United Kingdom. I do not
know whether any of you heard it. They said things were pretty
grim on the cable front. I wonder whether you would like to comment
on that? They also mentioned that things were pretty grim at NTL.
(Mr Carter) I did not hear the programme
in question so I cannot comment on the specifics. As you may well
know, we are in the process of, and indeed publicly announced
last week, engaging in what is called a balance sheet restructuring
exercise, which is designed to deal with some of the issues that
we have in the structure and shape of the capital side of our
business. The operating truth of the matter is that the cable
industry in the United Kingdom has probably never been healthier.
As I am sure you know the cable industry has been through a rapid
period of recent consolidation. Nowhere is that more evident than
within our own company. We bought somewhere in the region of 18
companies in the space of four years, creating a substantial integration
and operational improvement programme. We have not announced our
annual results. We will not until March or April, but last year,
2001, was the best year in the history of the company from an
operating perspective. You slightly have to distinguish the issues
around the balance sheet from the issues around the income statement
and the operating performance of the business.
312. They drew an analogy with the Channel Tunnel:
the huge capital cost of setting it up, but if you wrote that
off, which you cannot do that easily, the operating costs can
mean that you can show a big profit. Do you think NTL and other
cable companies under-estimated the cost of cabling up Britain
or was it that you over-estimated the rate of take-up of services?
(Mr Carter) I am not sure I entirely welcome the analogy
with the Channel Tunnel. There are now in truth two cable companies,
ourselves and Telewest, so the industry is essentially an operating
duopoly, although they are geographically discrete entities, so
there is no meaningful or real commercial competition. The cost
of the consolidation and the capital build was what it was. It
was what the markets at the time determined. There is no doubt
that in the last three or four years of that consolidation process
and that capital build process the telecoms, media and technology
sector was operating at valuations which today you just do not
see. However, all of the commentators would say that the industry
that we are in, technology, media and telecommunications, is going
to be a growth industry in the future. From a United Kingdom perspective,
the benefit to the country is that there is an alternative local
loop infrastructure. It is the only alternative local loop infrastructure
to that of the incumbent, dominant player, British Telecom. Whatever
the costs to the operating companies, the benefit to the country
is that that infrastructure is there, it is working, it is providing
services to many millions of customers. Today, as we sit before
you, the United Kingdom cable industry is the leading provider
of broadband services. Whatever the costs, the benefits are pretty
substantial to the country.
313. You have craftily steered me away from
the state of the financial structure of the industry at the moment
and onto areas of public policy. Barry Cox is now the latest Government
appointment. He is now the d-tsar, as opposed to disaster one
hopes, and you have Andrew Pinder who is the e-envoy. I am not
at all clear how they relate to each other. Have you spoken to
the two of them yet? How do you find the two of them relating
with each other, the role of the d-tsar and the role of the e-envoy?
Do you think they are going to make any difference?
(Mr Carter) We have been in regular, constant conversation
with Andrew Pinder. Barry Cox is not, as I understand it, a government
appointment. He is an appointment of the Digital Stakeholders'
Group, of which we are members. We endorsed the appointment of
an individual to represent the interests of all of the operators
in the digital arena. I have not personally yet sat down with
Barry since his appointment and had a direct conversation but
I am scheduled to do so tomorrow, coincidentally. Do we believe
there is a need to have a coordinated view across the various
players in the digital arena? Definitely. Is there a need to have
a greater level of convergence between debates about broadband,
internet and all things e and all things digital? Yes, there definitely
is and we have been very consistent in our calls to any of the
individuals representing those areas and the two government departments
that, given that the sector operates in a convergent way, it would
make sense for those key policy advisers and indeed key regulators
and government ministers to act in a convergent way as well.
314. Can I tease out some of the problems NTL
has? The FT said that Liberty In America are looking at buying
you, or is there some restructuring of debt with them?
(Mr Carter) I cannot comment.
315. You cannot comment because it is sensitive
(Mr Carter) I cannot comment because I do not know
what the FT did or did not say.
316. It did say that this morning.
(Mr Carter) I cannot comment on the suggestion.
317. What is the exact debt that you have to
reschedule with your shareholders?
(Mr Carter) It is difficult for me to be specific.
Shall I deal with this issue and put the public position on the
record? We have made an announcement that we are engaging in what
we call a restructuring process. We are being advised by a series
of bankers as to how to conduct ourselves during that process.
By dint of being in that formal process and because we are a US
listed company, that is largely a US driven process. We are somewhat
circumscribed as to what we can and cannot say in the public domain,
I am afraid. Suffice it to say that the operating business that
is NTL has never been healthier. This is an issue with our balance
sheet. We wish to restructure it. What do we mean by that? We
wish to reduce the absolute amount of the debt. By how much? I
cannot comment. In what manner? I cannot comment, but that process
will happen this year. It will complete and, when it does, we
will have not only a healthy balance sheet but, as we have today,
a healthy business.
Derek Wyatt: You will not be taken over
by Telewest or another player or anyone wanting to enter the market.
Do you not think you become vulnerable at this stage?
Chairman: I do not want to hamper your
line of questioning but this is not an inquiry into the status
and situation of NTL; we have invited NTL here today in order
to learn from them their views about the Communications Bill and
the role of organisations such as themselves in it.
318. Will this affect your investment in broadband
roll out? It is an obvious line of inquiry.
(Mr Carter) Entirely legitimate as well as obvious.
The facts speak louder than my words. Today, we provide broadband
services at a series of price points of which the most competitive
is £15 a month. Today, British Telecom provide some broadband
services at a retail price of £40 a month. British Telecom
have gone through a balance sheet restructuring exercise. If they
were before you today, they would not have to answer the questions
that you are asking about their balance sheet. If you look at
what we are doing in real time for real customers, we are rolling
out broadband services. We are the leading provider of broadband
services and we are retailing them at the most competitive price.
All of the evidence that we have seen suggests that the primary
barrier to take-up of high speed internet is effective retail
pricing. Our current balance sheet position is not affecting our
ability to offer those or indeed roll them out to more and more
customers on a daily basis.
319. What percentage of your customers currently
(Mr Carter) Over 100,000.