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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

(Mark One)

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

For the fiscal year ended December 31, 2001

or

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

For the transition period from                               to                               

Commission file no. 0-30673

NTL INCORPORATED

(212) 906-8440

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

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

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

      Indicate by check mark whether disclosure by delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  No þ

      The aggregate market value of the Registrant’s voting stock held by non-affiliates at March 26, 2002, the last day before suspension of trading on the NYSE of the Registrant’s Common Stock, valued in all cases in accordance with the New York Stock Exchange closing sale price for the Registrant’s Common Stock on such date, was approximately $44,114,400.

      Number of shares of Common Stock outstanding as at March 26, 2002: 276,626,476

DOCUMENTS INCORPORATED BY REFERENCE

      This Annual Report on Form 10-K for the year ended December 31, 2001, at the time of filing with the Securities and Exchange Commission, modifies and supersedes all prior documents filed pursuant to Sections 13, 14 and 15(d) of the Securities Exchange Act of 1934 for purposes of any offers or sales of any securities after the date of such filing pursuant to any Registration Statement or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by reference this Annual Report.

      “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:

Certain statements contained herein constitute “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. When used in this Form 10-K, the words, “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expects,” “estimates,” “projects,” “positioned,” “strategy,” and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Registrant, or industry results, to be materially different from those contemplated or projected, forecasted, estimated or budgeted, whether expressed or implied, by such forward-looking statements. Such factors include, among others, those set forth under the caption “Risk Factors” in this Form 10-K as well as: the ability of the Company to continue as a going concern; the ability of the Company to obtain trade credit and shipments and terms with vendors and service providers for current orders; the Company’s ability to maintain contracts that are critical to its operations; potential adverse developments with respect to the Company’s liquidity or results of operations; the ability to fund and execute its business plan; the ability to attract, retain and compensate key executives and associates; the ability of the Company to attract and retain customers; general economic and business conditions; technological developments; the Company’s ability to continue to design networks; install facilities; obtain and maintain any required governmental licenses or approvals; and finance construction and development, all in a timely manner at reasonable costs and on satisfactory terms and conditions, as well as assumptions about customer acceptance, churn rates, overall market penetration and competition from providers of alternative services, the impact of restructuring and integration actions, the impact of new business opportunities requiring significant up-front investment and interest rate and currency exchange rate fluctuations.

      In this Annual Report on Form 10-K, “NTL,” the “Company,” “we,” “us,” and “our” refer to NTL Incorporated and its consolidated subsidiaries except where we expressly state that we are only referring to NTL Incorporated or the context otherwise requires that we are referring only to NTL Incorporated.

      In this Report on Form 10-K, references to “(pound sterling)” “pounds sterling,” “(pound),” “pence” or “p” are to the lawful currency of the UK, references to “(euro)” or “Euro” are to the lawful currency of the European Monetary Union, references to “IR(pounds)” or “Irish punts” are to the historically lawful currency of the Republic of Ireland, references to “FRF” or “Francs” are to the lawful currency of France, references to “A$” are to the lawful currency of Australia, references to “CHF” are to the lawful currency of Switzerland and references to “U.S. dollars,” “dollars,” “$” or  “(cent)” are to the lawful currency of the United States. Solely for the convenience of the reader, this Form 10-K contains translations of some foreign currency amounts into U.S. dollars and some U.S. dollar amounts into foreign currencies. You should not construe these transactions as representations that the foreign currency amounts actually represent such U.S. dollar amounts or vice versa or could have been or could be or will be converted into U.S. dollars or foreign currencies, as the case may be, at the rate indicated or at any other rate. Unless otherwise indicated, the translations of foreign currencies into U.S. dollars and U.S. dollars into foreign currencies have been made at $1.4543 per UK (pound) 1.00, $.8901 per (euro) 1.00, $1.1337 per IR (punt) 1.00, $.1357 per FRF1.00, $.5117 per A$1.00 and $.5828 per CHF1.00, the noon buying rates in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2001. On March 31, 2002, the Noon Buying Rate was $1.4250 per (pound) 1.00, $.8717 per (euro) 1.00, $1.2539 per IR (punt) 1.00, $.1329 per FRF 1.00, $.5333 per A$1.00 and $.5945 per CHF1.00.

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TABLE OF CONTENTS

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PART I

NTL CORPORATE STRUCTURE

      NTL Incorporated, a Delaware corporation, was incorporated in December 1999, to effect a reorganization into a holding company structure under Section 251(g) of the Delaware General Corporation Law. The holding company structure, which was implemented in May 2000 in connection with the acquisition of the residential assets of Cable & Wireless Communications plc, was accomplished through a merger. The stockholders of NTL (Delaware), Inc. (formerly NTL Incorporated), at the effective time of the merger became stockholders of the new holding company, and NTL (Delaware), Inc. became a subsidiary of the new holding company. The new holding company then took the name NTL Incorporated. NTL’s principal executive office is located at 110 East 59th Street, New York, New York 10022, and its telephone number is (212) 906-8440.

      On February 21, 2001, NTL Incorporated contributed the residential broadband and business cable operations of Cable & Wireless Communications to NTL Communications Corp., a wholly-owned subsidiary. On February 21, 2001, NTL (Delaware), Inc. contributed the assets of NTL Business (formerly Workplace Technologies plc) to NTL Communications Corp. The following chart shows on a condensed basis the corporate structure of NTL through which our operations are conducted and investments held, accounting for both contributions. The chart does not show our operating or other intermediate companies or ownership interests in those entities. Please note that the following chart does not reflect the sale of NTL Australia that was completed on April 2, 2002.

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Item 1.     Business.

RECENT DEVELOPMENTS

Recapitalization Process

      On January 31, 2002, we announced that we had appointed Credit Suisse First Boston, JP Morgan and Morgan Stanley to advise on strategic and recapitalization alternatives to strengthen our balance sheet, reduce debt and put an appropriate capital structure in place for our business. Since then, we have been evaluating various recapitalization alternatives to effect a comprehensive consensual recapitalization in a timely manner and to minimize negative effects on our business operations. NTL has been engaged in discussions with an unofficial committee of bondholders, the members of which hold a majority in principal amount of the public debt of NTL and its subsidiaries, and France Telecom, which owns a significant amount of NTL’s common and preferred stock. On April 16, we announced that we had reached an agreement in principle with the unofficial committee on a comprehensive recapitalization of NTL and its subsidiaries. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and “Risk Factors” for a more detailed description of the proposed recapitalization plan and the associated uncertainties.

      The following business description does not address the possible risks or negative impacts that could result from the recapitalization process and our liquidity position. Accordingly, this section must be read in conjunction with Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Risk Factors set forth in that section, and the Financial Statements and related notes.

Sale of NTL Australia

      On April 2, 2002, we announced that we had completed the previously announced sale of our Australian broadcast business to Macquarie Bank for A$850 million (US$448 million) in an all cash transaction. NTL Australia owned and operated the most extensive terrestrial broadcast transmission network in Australia with over 98% population coverage provided from 578 sites located across metropolitan, regional and rural areas. For the year ended December 31, 2001, NTL Australia’s revenues were approximately A$119 million (US$62 million) generating EBITDA of approximately A$52 million (US$27 million). NTL’s Australian operations also included a 51% share in a joint venture, NTLT, with two Australian regional broadcasters (WIN Television and Southern Cross Broadcasting) operating a carrier grade wholesale microwave telecommunications network along the east coast of Australia.

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ABOUT NTL

      NTL is the leading broadband communications and broadband services company in the UK and the Republic of Ireland. We also provide telecommunications services in Switzerland and Australia and have made strategic investments in broadband operations in France, Germany and Sweden. Unless otherwise indicated, the following business description is as of December 31, 2001 and includes a description of NTL’s businesses in Australia which were subsequently sold.

      We offer services to residential, business and wholesale customers on a national and international scale.

      Our predominant lines of business are:

	•	Consumer Services, including residential telephony, cable television, Internet access and interactive services;
	•	Business Services, including business telephony, national and international carrier telecommunications, Internet services and radio communications services; and
	•	Broadcast Transmission and Tower Services, including digital and analog television and radio broadcasting, wireless network management, tower and site leasing and satellite distribution services.

      We believe that our operational success to date has been due largely to our focus on customer service and the development of services that emphasize value rather than simply low prices. Our product offerings incorporate our fundamental proposition of providing our customers with a full range of choices.

      Our business is underpinned by the $15.9 billion investment we, and companies we have acquired, have made in our network infrastructure. We provide our broad range of services over local, national and international networks. This network infrastructure consists of:

	•	Broadband Communications Networks in the UK that currently pass approximately 8.4 million homes and can be expanded to cover over 11 million homes in our regional UK franchise areas. These high-capacity two-way local broadband fiber networks serve entire communities throughout these regional franchise areas. Our fiber optic cables pass a significant number of businesses in these areas and are connected to distribution points, or nodes, which are typically within approximately 500 meters of each of the 500 homes typically served by each node. Each home is then connected by a cable allowing us to deliver telephone, cable television and Internet services over a single integrated network.

Additionally, we have broadband cable networks in Switzerland and the Republic of Ireland that currently pass approximately 2.3 million homes. These primarily analog cable television networks are in the process of being upgraded to allow for higher capacity signals and a suite of new products including digital television, cable modem Internet access and voice telephony.

	•	A National/ International Synchronous Digital Hierarchy, known as SDH, Fiber Optic Telecommunications Network in the UK which connects all of the major population centers in the UK to Ireland, continental Europe and the United States. SDH allows high speed data transmission and redirects transmissions in the event of a problem to prevent any disruption. This backbone network utilizes Asynchronous Transfer Mode, known as ATM, technology, a high speed, high bandwidth technology, and was built with sufficient duct capacity to accommodate over 2,300 fibers on the majority of the network. We designed this network to allow us to place the active components, such as routing devices, close to our customers, allowing us to offer a broad range of voice and data services.
	•	National Broadcast Transmission and Tower Network Infrastructure in the UK and Australia, which provide national, regional and local broadcast and wireless communications coverage. We own, lease, manage, or have access to, over 2,900 multi-user sites, including over 2,300 sites in the UK and over 575 sites in Australia. Our fixed line and tower networks in the UK are interconnected at numerous sites.

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NTL’s Businesses in the UK & Australia

      We spent 2001 integrating our UK operations following several years of acquisition and growth. Between 1998 and 2000, we expanded our UK operations significantly, predominantly through acquisitions. Between June 1998 and July 1999, we acquired the UK broadband operations of Comcast UK Cable Partners, Diamond Cable and ComTel as well as the Westminster and Milton Keynes cable franchises of British Telecommunications, or BT. In May 2000, we further increased our UK operations by completing our acquisition of the residential broadband and business cable operations of Cable & Wireless Communications, also known as Consumer Co.

      In the UK, we provide a broad range of communication services:

	•	ntl: home, delivering broadband services to residential markets comprising residential telephone, analog and digital cable television, narrowband and broadband Internet access and interactive services;
	•	ntl: business, comprising business telecommunications, national and international carrier telecommunications, Internet services and radio communication services;
	•	ntl: broadcast, delivering digital and analog television and radio broadcast transmission services, wireless network management, tower site rental and satellite and media services.

     ntl: home

      We are the largest provider of broadband services in the UK. As of December 31, 2001, we had approximately 2.8 million residential cable television and telephony customers and over 4.97 million revenue generating units, which we refer to as RGUs. At such date, our penetration rates were approximately 35% telephone penetration, 29% cable television penetration and 37% customer penetration.

      Throughout 2001, we worked to streamline our subscriber base, removing a backlog of approximately 45,000 non-paying and non-profitable customers in the second half of the year. We are planning to remove an additional 14,000 in the first quarter of 2002. We remove non-paying and non-profitable customers if our standard collections procedures do not achieve a satisfactory result. The action taken to remove non-paying customers provides us with a stronger customer base. Our average churn rate for the quarter ending December 31, 2001 was 21.3% on an annualized basis. Our average churn rate for the same period excluding involuntary disconnects would have been 17.7% on an annualized basis.

      We believe the most effective strategy to maximize revenues and penetration for our residential offerings is to bundle together telephone, cable television and Internet services. Our product and pricing strategies emphasize choice, value and quality and are designed to encourage subscription to multiple services to maximize customer retention and average revenue per customer.

      Including capital expenditures made by the companies and businesses acquired by NTL, we have spent approximately $11.2 billion on our network infrastructure in the UK.

      Our core network consists of optical fiber connected to distribution points, or nodes, each typically serving up to 500 homes, from which we provide coaxial cable and two copper pair telephone wires into each home. This cabling enables the provision of two telephone lines, an analog or digital television service and a high speed cable modem service to each customer’s home.

      Our fiber network has the capability to carry telephone services as well as high speed data services. The fiber network is capable of supporting digital subscriber lines, or DSL, which consist of a bi-directional 2Mb/s connection capable of supporting 30 voice channels and enable the provision of higher capacity services to business customers. We are able to support digital and interactive services as well as advanced video services over our network through cable modems that enable Internet access at almost 10 times the speed of conventional dial up access.

      Our cable modem service has been engineered to provide high quality residential high speed Internet access service. It is therefore able to support small businesses and people who work from home, including enabling a link to a company’s local area network, or LAN. We have in place the next generation of network

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     Internet access

      In March 2000, we announced a plan to offer our residential customers throughout the UK free, unlimited Internet access via their personal computers or, where available, televisions. This Internet service is called “ntlworld” and became available to some of our customers beginning in April 2000. As of December 31, 2001, we had approximately 695,000 ntlworld customers within our local franchises and 29,000 customers who used our service via digital TV access. We have decided to begin charging our customers for this service; however, we believe that we remain highly competitive in this segment of the market.

      Since the launch of ntlworld, the trend in UK Internet pricing has been towards offering unlimited Internet access for a higher fixed charge, as Internet penetration has grown and Internet usage has increased. In January 2002, we announced our decision to begin charging our customers for service and the launch of two new packages: “Pay as you go”, a metered service at 1p per minute; and “Unlimited”, an unmetered service at £10 per month. All subscribers to the free ntlworld service will be transferred to either “Pay as you go” or “Unlimited” during the first half of 2002. Existing ntlworld customers will benefit from a £5 per month price for Unlimited for a period of time.

      In 1999, we were the first communications provider in the UK to launch a high-speed cable modem Internet service, which links customers of our local cable franchise networks to the Internet at up to ten times the speed possible over standard telephone lines. As of December 31, 2001, we had approximately 118,000 cable modem customers. Approximately 80% of our networks are currently able to provide this service to our customers. Our high-speed Internet service currently operates at a speed of up to 2.0 Mb/s and is offered at minimum delivery speeds of 128 Kb/s, 512Kb/s or 1Mb/s. The service is an “always on” service, removing logging-on delays and the need to log off while using the telephone. It uses the hybrid fiber coaxial cable portion of our broadband network, which allows customers who also subscribe to a telephony service to simultaneously make or receive telephone calls while accessing the Internet. The 128 Kb/s and 512 Kb/s services are currently offered at flat rates of £14.99 and £24.99 per month, respectively, including the rental of a cable modem. This compares with the newly announced prices for Freeserve and BTOpenworld 512Kb/s ADSL services of £29.99 per month plus purchase of the modem. In the first quarter of 2002, we launched a 1 Mb/s modem offer at a price of £49.99 per month. We are currently the only provider offering 1 Mb/s service in the UK.

     Franchise customers

      We first introduced a bundled cable service to our franchise customers in 1996, when we implemented a promotional pricing and packaging structure called “Choices.” Since then, we have continued to refine and enhance our offering. The packages we currently offer to our UK residential franchise customers, excluding customers in Milton Keynes and Westminster, where we plan to launch broadband in 2002, and in some former Cable & Wireless Communications franchises which only offer cable television, comprise:

	•	telephone service, including a second telephone line for an additional charge unless the customer decides not to take television (99% of potential customers are now offered the “3-2-1” simplified telephone rate plan);
	•	narrowband Internet access service, if the customer takes a telephone service (97% of potential customers can subscribe for ntlworld flat rate narrowband Internet service);
	•	broadband Internet access service (two thirds of potential customers can subscribe for 128 Kb/s or 512 Kb/s broadband Internet service);
	•	all of the current terrestrial television channels and access to multi-channel television, including pay per view; and
	•	interactive television services.

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      Our packaging and pricing are designed to encourage our customers to use multiple services such as dual telephone and broadband, dual telephone and narrowband, dual telephone and TV, or triple telephone, TV and Internet access. Only telephone, with its low capital expenditure requirements and high margins, is available widely as a stand-alone single product. Of our competitors, only Telewest, which does not offer its services in our franchise areas, is able to offer the full range of services we provide (see table below).

     Cable television

      The selection of analog cable channels that we currently offer to our franchise customers varies based on the particular franchise area. This variation is a result of the different channel offerings we have inherited as a result of our acquisitions of various cable franchises over the past several years. Variation between franchise areas will increasingly be removed as digital cable television is rolled out offering the same channels, subject to regional programming variations. In addition to offering many of the popular channels available on BSkyB’s satellite platform, we also offer to all of our franchise customers, through our joint venture with Telewest, a cable-only movie, sport and special events pay per view television service called “Front Row” that we rolled out to our customers beginning in March 1998. Our joint venture with Telewest represented the first ever alternative in the UK to BSkyB in the provision of films and sports events through pay television. Front Row has signed content output contracts with major Hollywood studios, including Warner Brothers, Sony Pictures Entertainment (Columbia/ Tri-Star), the Walt Disney Company (Walt Disney Studios, Miramax, Hollywood Pictures and Touchstone), Dreamworks, MGM and Universal.

     Interactive services

      We have moved rapidly to take advantage of the convergence between the Internet and television and the advent of digital cable television. We are currently aggregating a broad range of interactive content into a service that can be deployed as part of our interactive television offering to our residential customers. Our interactive offering comprises a free television e-mail service, a “walled garden” of partner websites that have been specially redesigned for television and an online customer service application that allows select customers to see their NTL bill via the television.

      We have established relationships with over 75 content providers to deliver a wide range of interactive services, including education, shopping and banking, finance, travel, entertainment, games, news, sports and local content. Interactive content is organized into channels, including news, sports, travel, lifestyle, money, entertainment and shopping. Our partners include Sainsburys, Iceland, QVC, W.H. Smith and Domino’s Pizza. The travel channel includes content partners such as Go Airlines, Thomas Cook Travel Select and Teletext and the money channel features content partners such as Abbey National, The Halifax and Bloomberg.

      We also offer additional channels providing up to date news and weather information, games and educational content. Where appropriate, our contracts with content providers require the payment of tenancy fees as well as commissions on e-commerce transactions. We also derive revenues from the advertising opportunities that exist across our interactive service offering.

     Telephony

      In 1999, we launched the NTL “3-2-1” call plan for our residential franchise customers where national and local calls cost only three pence per minute during the day, evening calls cost two pence per minute and

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     Indirect access

      On November 7, 2001, we announced our sale of the right to offer services to approximately 230,000 indirect access telephone customers to Innogy for approximately £23 million ($33 million) including the collection of certain future service revenues and existing receivables.

      We acquired these indirect access customers as part of the acquisition of the residential businesses of Cable & Wireless Communications in May 2000. However, as these customers were not connected to our national backbone network, they could not benefit from our simplified calling tariffs, cost base or dial-up Internet service. Rather than risk the substantial churn associated with the process of migrating the customers to the NTL network and services, we determined that the sale of the customer base would result in the highest realizable value of the asset.

      As of December 31, 2001, we had approximately 118,000 off-net customers of which approximately 89,000 are also customers of our ntlworld Internet service. We do not incur the unfavorable interconnect costs that were related to servicing the Cable & Wireless indirect access telephony base because these indirect access customers are served by our national network.

     Customer management systems

      For most of our franchise areas, we use advanced billing and customer management systems which enable us to control all aspects of a customer’s account for both telecommunication and television products. We currently operate a number of billing systems inherited from the different operations we have acquired. We are in the process of merging these different systems onto a single platform, which we expect will reduce costs and improve customer satisfaction.

     Premium TV

      Premium TV Limited, which is a wholly owned subsidiary of NTL, has a joint venture with Eurosport, the pan-European basic tier sports channel, to develop British Eurosport, a version of Eurosport tailored to appeal to UK viewers. This channel is now available to all of NTL’s UK pay television homes.

      Premium TV has also entered into long-term joint ventures with a number of UK football (soccer) teams including Rangers, Leicester, Middlesbrough and Newcastle, as well as the Football League, which represents 76 teams, and has entered into a five-year operating agreement with Aston Villa. These joint ventures are intended to develop the football teams’ Internet and broadband rights which may include audio-visual footage of matches on a delayed basis and live audio coverage of matches.

      Premium TV is developing a Classic Sports television channel, and has a contractual arrangement with the BBC permitting Premium TV to show historical football (soccer) matches from the BBC’s library.

     ntl: business

      The primary objective of our business services division in the UK “ntl: business” is to provide a comprehensive range of voice, data and application based communications services for our business customers.

      Our existing customer base incorporates both private and public sector organizations. Within the private sector we focus on the areas of finance, utilities and travel. Within the public sector we have a substantial share of the market in emergency services, local government and education telecommunications requirements.

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      Our business strategy is to fully exploit our superior network capability and place an increasing emphasis on broadband products and services. Rather than simply offering our customers a lower price for their existing service, we offer a package of services designed to address all their communications needs at a price which offers good value. For our smaller business customers, we are providing a range of bundled packages based on our standard services and standard terms and conditions. For our larger customers, we offer services which are tailored for their specific needs.

      ntl: business has developed a diverse portfolio of skills and services through both product development and a number of significant acquisitions. Beginning in 2000, we commenced a program to integrate the skills and abilities of employees from Workplace Technologies, X-tant and ConsumerCo’s small business team with those of the existing business telecom operations, to create a single integrated portfolio and customer support organization. Another example of this strategy is our acquisition in the third quarter of 2001 of the UK assets and contracts of Viatel UK. Viatel was a provider of managed data and voice services to UK based corporate companies and also provided voice services to resellers, voice and Internet services to wholesalers and managed data services to other European managed service providers. In addition, we continue to focus specific sales and marketing efforts on winning business customers in our franchise areas and increasing revenue from our existing customers.

      Since August 1, 2001, ntl: business has been structured with three key business units within the overall UK communications market. These business units are Retail, Managed Network Services (incorporating Mobile, Enterprise, Public Safety and VISP) and Carrier Services. The segmentation enables us to develop a deeper understanding of our customers’ businesses which enables us to craft specific solutions and trading alliances appropriate for each specific market. The discussions below reflect the old structure of ntl: business.

      Following our analysis of published OFTEL statistics for telecommunications services, and Gartner Group statistics for other communications services, we estimate the size of the market in which we compete to be in excess of £24.5 billion for the year 2002. Of the total communications market, we estimate that approximately £17.5 billion represents business telecommunications and £7 billion represents carrier telecommunications services.

      Our network already passes within 200 meters of more than 570,000 business premises in the UK. However, as a result of the reach of our national network, we can serve a substantial portion of the UK’s approximately 1.2 million business premises through means such as indirect access. These premises host approximately 1.5 million business customers. We believe that the architecture and reach of our network infrastructure has positioned ntl: business to play a leading role in the delivery of broadband services to UK businesses going forward. We plan to exploit demand for broadband services primarily through our broadband cable modem product which was launched in the second quarter of 2001, and our E-1 Direct Internet Access Service. We will continue to market our standard products and services ranging from telephony and Internet access to data and e-commerce and managed services. These services will be delivered via copper wire, coaxial cable, fiber and wireless.

     Retail and Enterprise

      In our local direct markets (retail), our approach is to “think nationally but act locally.” In our business markets, our approach is to enable businesses to become more efficient and effective. Our focus is on small to medium sized businesses.

      Our business model for dealing with small businesses has changed over the last twelve months. In October 2000, we opened a new small business call center which uses telephone account management techniques to sell and service a range of simple business bundles for smaller businesses across the UK. Under this new business model, we have developed sophisticated marketing programs for our target customer base. In the second quarter of 2001, we added broadband services to the business bundle. In December 2001 we launched our new web site allowing customers to self provision a range of products and view their bills on-line.

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      Across these market sectors, we plan to utilize our national capabilities and the expertise of our market focused account management and technical support teams to target specific business sectors and increase penetration.

      As of December 31, 2001, we had approximately 76,000 business customers with an average of 5.1 lines per customer for a total of approximately 380,000 retail business telephony lines installed in the UK.

      We offer the following business products and services to our business customers:

	•	Access Services that connect our customers to us for inbound and outbound voice and data calls. These access services include additional analog business exchange lines, or BELs, and digital business exchange lines, or DELs. DEL services include basic rate access, also known as ISDN2, and primary rate access, also known as ISDN30. We believe these and other direct and indirect access services are priced competitively and are often in competition with similar services provided by a number of other direct and indirect suppliers. In the second quarter of 2001, we launched a business cable modem service that enables the delivery of broadband services to our business customers.
	•	Managed Voice Services/Virtual Private Networks that are best illustrated by our central exchange “Centrex” service. Through this service we provide our customers with business exchange lines configured as a “virtual PABX,” where we provide the services normally associated with a traditional PABX located at a customer’s premises. We provide these services on a rental basis which allows our customers to avoid the expense associated with an outright capital purchase and maintenance costs.
	•	Managed Data Services that include point to point private circuits at speeds of multiples of 64 Kb/s and individually tailored 100 Mb/s and 155 Mb/s services. Other services include the provision of inter-site data services with particular transmission protocols, such as Internet Protocol also known as TCP/IP, Frame Relay and ATM.
	•	Managed Local Area Networks (LANs), in order to support the developing needs of our business market, we have established significant capabilities that enable us to fully manage LANs or to design, project manage and integrate new LAN platforms for our customers.
	•	08xx Services that include free local and national call services together with a range of other routing features based on our network. These services enable our customers to manage inbound calls and establish varying tariffs for their customers to contact them.
	•	Internet Services, in order to provide our customers with the tools they require to build their e-business services including dedicated, high-speed Internet access services, web hosting services, and specific individually tailored applications securing and protecting their e-businesses. The range of services we provide also includes the provision of simple, inexpensive software to enable our customers to begin doing business over the Internet.

      We have a variety of alternative methods to carry our national telecommunications network over the “last mile” to the premises of those customers which are located outside of our franchise area:

	•	Obtaining permits to construct telecommunications networks, and building out our network to reach our customers. Although this is often the most costly means of reaching a customer, the expense can be justified in the case of larger customers or where a significant level of traffic is obtained from a customer. For example, we have extended our fiber optic network within London to reach and support CNN’s facilities.
	•	Leasing circuits on the local networks of other service providers to connect to our customer’s premises. Although this may reduce the operating margin on a particular account, it requires significantly less capital expenditure than a direct connection, can often be put in place relatively quickly and can be replaced at a later date if traffic volumes justify it.
	•	Connecting customers to our national telecommunications network by implementing microwave radio links which utilize our significant tower infrastructure to connect our network to our customers, using digital point to point microwave radio links. Alternatively, we believe our license to operate radio fixed

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		access services on a national basis throughout the UK at the 10 Ghz frequency, could enable us to use “wireless local loop” technology to connect our network to our customers, although we are not currently utilizing this approach. Either of these two methods requires the installation of a mini-tower site on the roof of the customer’s premises to receive and broadcast data. “Wireless local loop” connectivity would enable a radial transmission to a number of sites surrounding the mini-tower whereas point to point connectivity enables transmission between two points only.

     Public Safety

      In addition to meeting the traditional voice and data requirements of businesses throughout the UK, our Radcomms business offers a full range of communications services, including the design and operation of radio networks and the provision of support, maintenance and facility management services to customers who provide public safety services to the community. Our customers include primary providers such as police, fire and ambulance and secondary providers such as H.M. Prison Service, the Coast Guard and the Royal National Lifeboat Association. We have been servicing a substantial portion of the radio installation and maintenance market for public safety in the UK for many years and our public safety customers provide us with a relatively steady source of revenue.

      We intend to position ourselves to increase our activities in the public safety sector from facilities and maintenance activities into complete outsourcing arrangements. We believe we are at the forefront of managed communication services in the public safety sector, and we believe that the majority of the British Public Safety Services will move from their current service arrangements into outsourcing and the provision of fully managed services. We believe we have already established a strong position in outsourcing services and facility management for these mission critical customers, and plan to continue to build on our existing relationships with current customers. An example is the Metropolitan Police Authority (New Scotland Yard), for which we manage communications services for over 25,000 police officers.

     Wholesale (Carrier Services, Mobile and VISP)

      Our wholesale markets group’s main focus is the supply of UK infrastructure and bandwidth to national and international telecommunications operators. Our national and local networks are used to interconnect these carriers to cities in the UK and Ireland. NTL wholesale has seen continued growth over the last five years, and has successfully positioned itself as a key supplier of wholesale services. We expect to continue to serve the wholesale marketplace through our strategy of providing high quality and competitively priced services which can be customized where necessary.

      Our customers include fixed wire line and mobile telecommunications operators and Internet service providers, or ISPs, such as AOL, COLT, Worldcom, other cable operators, and various information technology and facilities management companies. A dedicated team addresses the needs of the UK mobile operators, and we are a major supplier to Vodafone and Orange. We have developed a successful business supplying core interswitch network capacity to UK mobile operators and have commercial relationships with the four incumbent mobile operators.

      We have been instrumental in developing a new commercial and technical model for the supply of networks to the mobile operators. These developments culminated in our being awarded, in April 2000, a five-year £150 million contract by Orange. A key element of the contract, by which Orange outsources the maintenance and provisioning of that network, is the extension of our existing core network. All five third generation mobile operators in the UK will need to implement network and services to support 3G services, and we will work to define and co-ordinate our strategy for supporting 3G services.

      A growing area of our wholesale business is selling voice termination services to a wider mix of operators, and using these relationships to reduce the cost-base for our telephony traffic by:

	•	creating a self sustaining revenue stream,
	•	establishing commercial relationships with wholesale customers thus enabling us to cross-sell and up-sell other products, and

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	•	generating revenue and cost reduction opportunities for other parts of NTL.

      The growth in the number of international operators building and operating submarine cable systems in recent years has been substantial, with many of the cables crossing the UK. We have considerably increased physical connectivity to UK international cable landing stations and developed products to address the needs of the international cable operators for carrier services between the cable landing sites and the major UK international nodes such as Telehouse, London, which services are also known as “backhaul” services.

      Utilizing our ATM national network, we have developed Frame Relay and ATM wholesale products to meet demand for high-speed data connectivity. Additionally, our core data network, local loop infrastructure and connectivity to the main international nodes, will allow us to address the needs of international operators for the termination of UK-bound and origination of UK-generated data traffic.

      In addition to wholesale telecommunications and data services, we also offer wholesale Internet access solutions including network services, call center operations and customer provisioning and billing to UK ISPs and other corporate customers that would like to expand their Internet presence. This service was launched in 1995.

     ntl: broadcast

      On April 2, 2002 we announced that we had completed the previously announced sale of our Australian broadcast business to Macquarie Bank for A$850 million (US$448 million) in an all cash transaction. At that time, the business’ bank debt outstanding, which was subsequently extinguished, totaled A$227 million (US$118 million).

      NTL Australia owned and operated the most extensive terrestrial broadcast transmission network in Australia with over 98% population coverage provided from 578 sites located across metropolitan, regional and rural areas. For the year ended December 31, 2001, NTL Australia’s revenues were approximately A$119 million (US$62 million) generating EBITDA of approximately A$52 million (US$27 million). NTL’s Australian operations also include a 51% share in a joint venture, NTLT, with two Australian regional broadcasters (WIN Television and Southern Cross Broadcasting) operating a carrier grade wholesale microwave telecommunications network along the east coast of Australia.

      We own and operate wireless communication and broadcast transmission infrastructure in the UK and, until the completion of the sale on April 2, 2002, in Australia. We provide our customers with enhanced products and services through our broadcast network, state of the art equipment, and innovative facilities management expertise. Our customer base includes over 1,000 companies, including all of the leading UK mobile wireless operators and all major commercial television and radio broadcasters.

      We have a proven history of developing new products and services to meet the needs of our customers and drive the growth of our business. These developments include the implementation of Teletext, a text based data service transmitted with the analog television signal, the implementation of NICAM in the 1980s enabling the transmission of digital stereo and Dolby audio over analog television transmissions, and most recently the design and implementation of the world’s first digital terrestrial television and digital audio broadcasting networks and services for our UK and Australian broadcast customers.

      We provide products and services to three distinct market areas:

	•	Site Leasing and Services. We operate the second largest independent portfolio of wireless towers and sites available for lease in the UK and one of the largest towers and sites portfolios in Australia. In total, we operate over 2,900 multi-user sites (approximately 2,370 of which were in the UK as of December 31, 2001), up from approximately 600 sites in May 1996. As of December 31, 2001, we leased space on our towers to over 4,200 lessees including all of the major wireless operators in the UK and also offer unique services such as “In-Building” a wireless connectivity that can enhance their wireless coverage in high-traffic areas such as shopping malls, office buildings and conference centers.
	•	Broadcast Transmission and Services. We own and operate one of two television broadcasting infrastructure networks in the UK as well as the only national broadcasting infrastructure network in

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		Australia. Additionally, we have national, regional, and local radio broadcast infrastructure networks in both the UK and Australia. We developed the first commercial digital terrestrial television service in 1998 and the first commercial digital radio station in 1999. Because, unlike broadcasters in the United States, we own and operate not only the towers but also the broadcast transmission infrastructure, our broadcast customers rely on our network and package of integrated turn-key services to distribute and broadcast their content.
	•	Satellite and Media Services. We provide satellite and media services in the UK and value-added services such as playout, fixed and mobile satellite up-linking, and a wide range of occasional & outside broadcast services to generate incremental revenue. Our ability to offer a full range of services from content gathering, distribution & transmission is unique in the UK market.

      Our broadcast and wireless customers generally hold long term licenses and enter into service agreements with us that typically last 10 to 15 years.

     Site Leasing and Services.

      We operate a UK wireless infrastructure network of approximately 2,370 multi-user sites as of December 31, 2001. We own, lease or manage approximately 1,570 UK sites and have access to approximately 800 undeveloped sites. Our primary business is the leasing of antenna space on our sites to a diverse range of wireless service providers, including providers of mobile telephony, paging, specialized mobile radio, or SMR, and wireless local loop services. We have also developed a range of complementary services that utilizes our tower expertise, including infrastructure services, site selection and acquisition, design and construction, antenna installation, network planning and management, and tower maintenance.

      Our network in the UK is national in scope and includes most of the major population centers and highways. Our wireless customers currently include all of the UK mobile telephony operators, including Vodafone AirTouch, mmO₂ (formerly known as BT Cellnet UK), Orange, One2One and Hutchison 3G, all the major paging companies, and many of the UK’s largest wireless telephony carriers, including BT, Cable & Wireless, and Thus plc. We also serve several utility companies and emergency service organizations including British Gas, London Ambulance and Her Majesty’s Customs and Excise.

      Second generation wireless services have been the major driver of our growth to date, but the advent of third generation wireless services is expected to drive further revenue growth. During 2000, the UK government awarded five national Universal Mobile Telecommunications System, or 3G, licenses each for a duration of 20 years, commencing January 2002. These licenses have been awarded to four existing operators, all of whom are existing wireless customers of ours, and to one new entrant. Under the terms of these licenses, each operator will provide services to at least 80% of the UK population by December 2007. Construction of these networks has commenced in 2001 and is expected to generate significant further demand for suitable existing & new sites over the next few years. The increased demand for suitable sites is driven by the greater bandwidth and different range characteristics of 3G technology, inherently requiring a greater number of sites than 2G technology.

      The dramatic growth of wireless communications necessitates good cellular coverage in all commercial areas, leading to a requirement for reliable wireless communications infrastructure inside buildings. We believe this creates a new type of radio site which, unlike towers, will exist within commercial buildings, transport hubs, shopping malls and other large buildings. Our analysis shows that there are approximately 2,000 of these types of commercial properties in the UK. As at December 31, 2001, we had built shared coverage systems in 26 large buildings including Bluewater, Britain’s largest shopping complex and Canada Square, part of London’s Canary Wharf complex.

      Building on the technology we developed for In-Building services, we are exploring with UK mobile operators ways of using our fiber network to solve the distance, coverage and power problems associated with 3G rollout in urban areas. Although in an early stage of development, we believe that a solution utilizing small low-profile antennas, positioned on buildings and other street level infrastructure and connected via our fiber

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     Broadcast Transmission and Services

      We have been involved in broadcast television since the 1950s when we designed and built the television transmission system for the UK’s first independent commercial television network. Through our national infrastructure of owned and shared transmission sites and our owned network of transmitters in the UK and Australia, we provide broadcast signals for the three commercial national television channels in the UK (ITV1, Channel 4, Channel 5), the two publicly-owned national broadcasters in Australia (ABC, SBS), a number of more recently established commercial channels through the UK Digital Broadcast multiplexes, and many of the UK’s independent local, regional and national radio broadcasters.

      An attractive feature of our broadcast contracts is our ownership of both towers and transmission equipment responsible for generating the broadcast signal. As a result, the contracts increasingly have become end to end solutions including all technical and service aspects of providing the transmission for the broadcaster. In essence, TV and radio station owners are programmers and we are the broadcaster. We have used this as an opportunity to develop strong relationships with our customers, which in turn has helped us to better understand their needs and customize new services for them.

      Television broadcasting. We provide digital and analog broadcast transmission services for national and regional television broadcasters. The analog network provides coverage to 99.8% of the UK population, with approximately 3,500 broadcast transmitters. Our extensive television broadcast customer base includes all of the UK commercial terrestrial television broadcast companies consisting of the ITV national network of 15 affiliated stations, the national services of Channel 4 and Channel 5, as well as the regional service S4C in the UK. In addition, we provide transmission and site services to both of Australia’s publicly-owned national broadcasters, ABC and SBS.

      We provide digital terrestrial broadcast transmission for two of the three commercial national digital television services in the UK. These services carry up to 12 separate channels, including the ITV network, Channel 4, Channel 5 and a range of new digital channels and services such as pay per view. As of December 2001, we were operating 80 digital terrestrial television transmitting stations reaching approximately 88% of the UK population.

      Digital broadcast systems require a more complex engineering design than their analog predecessors. We have exploited this by extending our range of services to include tower leasing and transmission services (as with analog) plus “end-to-end” system integration and service ranging from studio playout centers to terrestrial transmission. This has the twin benefits of enlarging the total market available from broadcasting and further differentiating us as a unique provider able to offer towers, transmission and system integration services for digital television.

      Radio broadcasting. We are one of two major companies providing transmission sites and services to the radio industry in the UK. We offer a range of services to radio broadcasters including: target service area planning; site location; installation and commissioning; and equipment selection, procurement, operation, monitoring and maintenance. We believe that we are a supplier of transmission services to a substantial portion of the addressable market. Our radio broadcast customer base includes two of the three national commercial stations: Classic FM and Talk Radio, over 200 metropolitan, regional and local stations and the first all digital radio station, Digital One, of which we are a founding equity partner with a 37% equity interest. We have a contract for the transmission of Digital One with a lifetime value in excess of $75 million. The UK government has embarked on a program of licensing a number of new regional and local digital radio multiplexes. As of December 31, 2001 we have secured contracts to build transmission and supporting network for 24 of the 27 licenses awarded so far.

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     Satellite and media services

      We own and operate satellite up-linking facilities consisting of over 30 fixed satellite up-link dishes able to access over 50 satellites with global coverage, a network of mobile and transportable up-links, management and control systems and all associated operations and maintenance. We provide our satellite customers with program and content distribution services for over 160 full-time channels via satellite and fiber. In addition, we have facilities for playout services, remote satellite news gathering, and full outside broadcast. Through an alliance with Williams Vyvx, a Williams Co. company, our customers also have access to 48 cities in the United States.

      We have expanded our service offerings over time to meet the growing needs of our customer base as new technologies create new broadcast markets. As a way to add incremental revenue, we have begun to integrate backwards with our existing customers by offering value added services. Such service developments include:

	•	establishment of playout services, which enable us to take ownership of the customer’s transmission needs from the point that it delivers the program or content and needs a channel to be created. We then are responsible for all the operational issues related to the broadcast of that content. We have a state of the art playout facility outside of London designed to meet the rising demand from broadcasters across Europe.
	•	offering a range of occasional use broadcast services that allow media content providers to outsource their off-site broadcasting needs, whether it be for breaking news, sports events or music concerts, and still deliver the desired content to their customers via our mobile equipment.

      Our Satellite and Media customers include programmers who own and operate packages of content or channels, news agencies, sports broadcasters and production companies. Our customer list includes such market leaders as AOL/ Time Warner (CNN, Turner, Cartoon Network), BBC, Discovery Channel, QVC, Reuters, the Associated Press and British Sky Broadcasting.

NTL’s Businesses and Investments In Continental Europe & The Republic Of Ireland

     European Businesses and Investments

      Prior to 2001, we made several strategic investments in leading European markets. In July 1999, we acquired Cablelink in the Republic of Ireland, which then had over 400,000 franchise homes in Dublin, Galway and Waterford. In two steps during August 1999 and December 1999, we acquired the “1G” Networks in France, our first acquisition in Continental Europe, acquiring approximately 266,000 franchise homes in the Greater Paris area. In March 2000, we completed the purchase of the cable assets of the Cablecom Group, Switzerland’s largest cable company. Also in March 2000, we acquired a 25% interest in Svenska Bredbandsbolaget A.B., or “B2”, a company based in Sweden, which is deploying fiber directly to the home in Scandinavia. Finally, in August 2000, we acquired a 50% interest in eKabel InvestCo, which owns 65% of eKabel L.P., the cable network in the Hessen province of Germany.

      In May 2001, we completed the purchase of a 27% minority investment in Noos S.A., the market leading French broadband company. We subsequently merged 1G Networks into Noos in November 2001. In September 2001, we increased our minority interest in B2 to 34%.

      Our European strategy has three key components:

	•	continue upgrade of network infrastructure in Switzerland and France and begin upgrade in Germany for delivery of advanced broadband solutions to consumers and businesses,
	•	replicate our success with bundled services in the UK in order to drive penetration of new products and maximize profitability per subscriber, and
	•	realize the benefits of economies of scale through continued integration while maintaining a regional focus on customer operations.

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      We have a premier footprint across Europe, including:

	•	Europe’s three largest financial centers — London, Paris and Frankfurt;
	•	Europe’s wealthiest population — Switzerland; and
	•	Europe’s most advanced broadband market — Sweden;

      As of December 31, 2001 we had access to 20.3 million franchise homes across the UK, Ireland and Continental Europe, and served approximately 7.1 million customers (assuming 100% ownership of our minority interests).

      Across Europe we continue to focus on capital efficient upgrades of these cable networks for the delivery of bundled high-speed Internet, digital cable television and telephony services to the consumer market and advanced broadband services to the business community.

      In 2001, we benefitted from the significant demand for broadband services. Significant progress in focused network upgrades and a commitment to market to the most attractive demographic areas first have been the focus for achieving meaningful penetration and return on investment. Evidence of the success of this strategy has been our broadband penetration. By December 31, 2001, we achieved 20% penetration of marketable homes in Switzerland, and 34% in Sweden. We reinforced our position as a broadband leader in Western Europe, with more than 229,000 broadband customers in continental Europe (assuming 100% ownership of our minority interests).

     Switzerland

     Cablecom GMBH

      In March 2000, we acquired the business and assets of Cablecom GMBH, Switzerland’s largest cable operator. Cablecom is Switzerland’s largest cable operator with approximately 53% of the Swiss cable television market as of December 31, 2001. As of December 31, 2001, Cablecom delivered products and services to 1.4 million subscribers in 100% ownership service areas, reflecting a penetration rate of approximately 91%. Cablecom also delivers signals via its national fiber backbone to other cable operators who serve another 490,000 subscribers, including third party wholesale and partial ownership of signal. Over 90% of television broadcasting in Switzerland is delivered over cable networks. As of December 31, 2001, Cablecom also had over 67,000 broadband Internet and 48,000 digital television customers.

      Cablecom also owns SwissOnline, one of the largest Internet service providers in Switzerland with approximately 161,000 dial-up customers as of December 31, 2001. Cablecom already has a telecommunications license to provide voice, data and other value added services in Switzerland, and expects to commercially launch its Voice over Internet Protocol, or VoIP, telephony product in 2002.

      Cablecom is the largest alternative fiber link telecommunications operator in the Swiss telecommunications market.

      Cablecom’s business extends beyond basic television services. Our objective is for Cablecom to become the premier provider of communications services for Switzerland’s residential and business markets.

      During the third and fourth quarter of 2001, our European management team took an active role in managing the business in Switzerland. We reorganized Cablecom’s management and organizational structure to a customer focused organization — marketing the product for the consumer and realizing Cablecom’s unique business to business opportunity. In 2001, we integrated several business units and legal entities, reducing the number of departments from 13 to 7, thereby reducing multiple interfaces to the customer.

      As part of the reorganization, in October 2001, Rudolf Fischer joined the European management team as the new Chief Operating Officer of Cablecom. We have also hired Cablecom’s first Chief Marketing Officer, and through internal candidates, Cablecom’s Chief Financial Officer and Head of Consumer Services. As part of the effort to streamline Cablecom and reduce costs, we also implemented a redundancy plan in 2001, reducing headcount by 260 out of 1,960 full-time equivalent employees.

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      Core elements of our strategy for Cablecom include:

	•	introducing value added services, including high speed Internet, digital television, pay-TV, video- and audio-on-demand, and telephony,
	•	installing superior customer care operations in order to support growth in the number of direct customer relationships and the rollout of new products and services, and
	•	increasing capacity in major cities and suburban areas and increase bi-directionality beyond the current one million homes.

      Cablecom currently operates in the following five business areas:

	•	Fully Owned Cable Networks. Residential cable television is Cablecom’s largest business and comprises 28 different cable networks of which six are wholly-owned by Cablecom. This accounts for approximately 90% of total managed subscribers. As of December 31, 2001, Cablecom had 53% market share in Switzerland and a penetration rate of over 90% of homes passed, 82% of homes passed have been converted to digital and 53% of homes passed had bi-directional capability. Approximately 48,000 digital television customers and 67,000 broadband Internet subscribers were connected at year-end. Approximately 82% of Cablecom’s subscribers are in the German speaking region of Switzerland, 10% in the French speaking region and the remainder in the Italian speaking region.
	•	SwissOnline. SwissOnline, a wholly owned Cablecom subsidiary, is one of Switzerland’s largest Internet service providers and one of the leading portals in the country. As of December 31, 2001, SwissOnline had approximately 161,000 subscribers. As part of the Cablecom reorganization in 2001, SwissOnline was integrated with Cablecom’s high speed Internet product management and customer operations.
	•	Cablecom Business. Cablecom Business, formerly know as Carriers Solutions or National Telecoms, was launched in January 1999 to offer advanced data services to the Swiss business segment. With one of two national fiber backbones, Cablecom Business provides voice and data services to the small, medium and multi-site national segments. Current products include leased lines, virtual private networks, connectivity, and carriers’ carrier services. Cablecom intends to intensify the roll-out of its national telecommunication and data services in 2002. Cablecom believes that it is well positioned to connect business customers within its service areas as it estimates that most business customers are within 50 to 100 meters of Cablecom’s existing network infrastructure.
	•	Rediffusion. Rediffusion, Cablecom’s consumer electronics retail chain, sells consumer electronics products and accessories. It also has rental, maintenance and service and repair operations. Historically, Rediffusion has been run independently of Cablecom’s cable operations. As part of the company’s reorganization, Cablecom is currently integrating Rediffusion to leverage the retailer’s extensive national network to distribute Cablecom’s broadband multi-service offering, including digital cable television, high-speed Internet and telephony services and to bundle those with Rediffusion’s products and services, including installation and maintenance.
	•	Engineering. Cablecom Engineering AG, a wholly owned subsidiary of Cablecom, provides cable television engineering services to Cablecom and third parties. Cablecom Engineering AG is the leader in Swiss cable television engineering with a market share of 75%. Services include third-party cable television systems and network infrastructure planning and design, project management, and network measurement and maintenance. As part of the company’s reorganization, Cablecom Engineering was integrated into the Cablecom network division in 2001.

      Network Upgrade. Cablecom is currently upgrading its nationwide network, which consists of three interconnected segments:

	•	Fiber optic backbone
	•	Hybrid-fiber coaxial or “HFC” network

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	•	In-house installations

      Through our network upgrade program, over 82% of homes passed were upgraded at the end of 2001. Moreover, as HFC networks in each area are upgraded, Cablecom upgrades in-house installations at the request of subscribers wishing to subscribe to new services, including digital cable television, high-speed Internet and telephony services.

      Cable Television Services. In November 1999, Cablecom launched digital services under the SwissFun brand name in German-speaking regions. Using a purchased or leased set-top-box, Cablecom subscribers can access an additional 30 digital channels for free, as part of their basic television subscription offering. The subscribers can then subscribe to over 20 additional channels in pay packages. Cablecom continued the roll-out of its SwissFun digital television offering during 2001, concurrent with the upgrade of its regional networks.

      In addition to increasing the number of channels that can be broadcast, the introduction of digital broadcasting allows Cablecom to address each set-top-box individually, providing Cablecom with the necessary flexibility to bundle expanded basic and pay channels into more attractive pay packages. This customization of content and the potential to differentiate substantially from the basic television offering is expected to make pay television much more attractive than its current form. In 2002, Cablecom plans to offer additional pay packages and pay-per-view services over its network.

      Internet Services. Cablecom will continue to roll out high-speed Internet access services throughout its service areas as its networks are upgraded to bi-directionality through 2004. To maximize the return on capital expenditure, Cablecom is first upgrading subscriber areas where demand is the highest. As of December 31, 2001, Cablecom provided cable modem services to 67,000 subscribers.

      In its franchise areas, Cablecom offers both residential customers and businesses Internet access services connecting users to SwissOnline’s portal via Cablecom’s network, and thus retain all usage related revenues for dial-up services and all access revenues for all types of subscription-based Internet services such as pay dial-up and high-speed Internet services.

      Telecommunication Services. Apart from Swisscom, Cablecom is the only company with a nationwide footprint and a local loop infrastructure. Cablecom expects to be able to provide broadband local loop infrastructure access to nearly 50% of Swiss households. Cablecom’s local loop networks cover all major Swiss cities, except Lausanne and Geneva, where Cablecom has a 12.2% stake in 022 Télégenève, a company which provides such coverage.

      In December 2001, lab testing and field trials of the Cablecom VoIP telephony product proved successful. Cablecom plans the commercial launch of its telephony product in mid-2002.

     Ireland

      In July 1999, we acquired Cablelink Ltd. in the Republic of Ireland, which then had over 400,000 franchise homes in Dublin, Galway and Waterford.

      This company provides cable television services in Dublin, Galway and Waterford to over 370,000 subscribers. As of December 31, 2001, the company had an 83.4% penetration rate over its broadband cable network, which passes over 440,000 homes. The company holds licenses to provide analog and digital television services in its franchises for the next 12 years with exclusive rights for the next two years. It also has a full service license allowing it to provide public telephony, Internet and other value-added services throughout Ireland.

      Among our 2001 highlights, Cablelink:

	•	developed and successfully rolled out our digital television service in Dublin, Galway and Waterford;
	•	met all of our regulatory milestones for the provision of digital television;

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	•	integrated our residential and business to business divisions in Ireland to create a single operating entity — thus deriving extra operational efficiencies and synergies;
	•	migrated 95% of our customer base onto a new customer relationship management system; and
	•	made all systems fully Euro compliant for the introduction of the Euro.

     France

     1G Networks and Noos S.A.

      We acquired France Telecom’s 1G Networks in two steps in August 1999 and December 1999. Pursuant to our purchase agreement, we held exclusive licenses to provide analog and digital television services over 1G Networks. 1G Networks has launched a pilot version of its digital platform, increasing the number of channels available to customers as well as providing high-speed Internet access.

      On August 7, 2000, we announced that we had signed an agreement in partnership with Morgan Stanley Dean Witter Private Equity to purchase France Telecom’s 49.9% stake in Noos S.A. We closed the transaction in May 2001 and acquired 27% of Noos for approximately $594 million in liquidation preference of our preferred stock, based on an enterprise value of Noos of Euro 2.7 billion ($2.45 billion). In November 2001, to capitalize on network synergies and customer proximity, we merged our 1G operations in France with Noos.

      The combined Noos/ 1G is the market leading French broadband company, offering analog and digital cable television, high-speed Internet and telephony services to a total of 939,000 customers as of December 31, 2001. As of December 31, 2001, its network passed 2,811,000 homes and businesses. As of December 31, 2001 there were an estimated 3,447,000 homes and businesses in Noos’s and 1G’s combined franchise areas. Noos currently provides high-speed Internet access to over 92,000 homes and businesses in France.

      Noos operates a fully digital hybrid fiber coaxial network comprising over 16,000 km of coaxial and approximately 4,000 km of fiber cable. This network provides Noos with a unique platform to implement a broadband strategy in France. In addition, Noos has secured long term access rights to underground ducts for future network upgrade.

      Our investment in Noos provides us access to metropolitan Paris and Strasbourg and other major cities in France. Noos offers significant efficiencies with our core business of bundled digital cable television, high speed Internet and telephony services.

     Germany

      In August 2000, we completed a 50% investment in eKabel Investco, which owns 65% of iesy Holdings GmbH, the Hessen cable network in Germany. iesy Hessen GmbH owns and operates the largest cable television network in the German province of Hessen, which includes Frankfurt, the second largest financial center in Europe. iesy currently broadcasts up to 33 analog channels, 13 digital channels and 36 radio channels.

      There are approximately 2.8 million homes in Hessen, of which 66% or 1.8 million homes were passed by iesy’s network as of December 31, 2001. Of the 1.8 million homes passed, 72%, or 1.3 million homes, are connected to iesy’s network. For the year ended December 31, 2001, iesy Hessen GmbH generated a total revenue of Euro 115.8 million. iesy has a historical annual churn rate of less than 6%, which compares favorably to other European and U.S. cable providers. This loyalty of its customer base provides a solid platform on which to offer iesy branded products, such as “iesynet” and “iesyphone.”

      In October 2001, iesy successfully completed network upgrade technology trials. iesy is currently upgrading its network and expects to upgrade 300,000 homes in 2002. The network upgrade plan will focus first on areas which offer attractive demographics for return on iesy’s investment. This upgraded network will

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      iesy’s high speed Internet product, iesynet, has seen high demand in a pilot program in Frankfurt. Commercial launch of iesynet is targeted for mid-2002. Also in 2001, iesy was granted a class 4 voice telephony telecommunications license, and expects to offer VoIP telephony over its network in 2003.

     Sweden

     Bredbandsbolaget (“B2”)

      As a result of a series of transactions from March 2000 through September 2001, we have acquired a 34% interest in B2. B2 is a rapidly growing broadband communications company providing 10 Mb/s network access and broadband services to residential and small-to-medium business customers. In 2001, B2 concentrated its efforts on rapidly growing the business in Sweden by stopping its expansion efforts in Norway and Denmark. During 2001, B2 reduced the number of its permanent and temporary employees from approximately 600 to 210 people, and grew its subscriber base from 18,700 to over 69,700 customers. In September 2001, B2 raised SEK 2.4 Billion ($224 million) in a private placement.

      B2 provides “always on,” low-cost access to a high-capacity broadband network that provides transmission, both to and from the customer, at the same speed and at the same time. B2’s 10 Mb/s network access speed is substantially faster than typical connections offered by existing cable television and telecommunications operators and is upgradeable to 100 Mb/s without significant expense. In addition to broadband access, B2 intends to provide telephony and video access to its customers through a personalized, interactive interface. Similar to Cablecom and iesy, B2 has already successfully tested its VoIP telephony product.

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      The following table illustrates our holdings in Western Europe, including that in the UK:

Western Europe Customer Statistics as of December 31, 2001