Costly rivalry that landed NTL with crippling bill
TODAY'S £7.6bn write-down covering impairment of goodwill, the collapse in value of assets and restructuring charges explains not only why NTL's loss of $15.85bn (£11.2bn) is the largest ever by a British-based company but also reveals largely where it went wrong.
The vast bulk of the write-down reflects the two-year spending spree which NTL embarked on in the late 1990s. It not only bought out 11 of its rival UK cable franchises and spent on Australian and European acquisitions but even took 9.9% stakes in five leading British football clubs - all for the mighty bill of around £12.5bn.
Between 1996 and last year NTL, headed by Barclay Knapp, and its arch-rival Telewest, led by Adam Singer, vied for the top slot in Britain, picking off their rivals one by one. Between them they created an ever spiralling auction.
In the end it proved too costly for both as NTL's debts topped £12bn and Telewest's £5bn. The obvious solution was a merger, which neither Knapp nor Singer opposes in principle. But the decision is out of their hands because bondholders now wield much more power than shareholders. At the same time that NTL was spending all its capital and more, the proposal it was making to consumers was not catching on.
In television Rupert Murdoch's 40%-owned British Sky Broadcasting stole the march in multi-channel programming. His satellite system was available immediately. Since NTL relied on cable it had to spend massive sums digging up roads. In the US, where cable has worked, the suppliers were allowed the much cheaper option of stringing their cables between telegraph poles.
At the same time the fibre-optic networks it had bought through takeovers proved not to be as reliable as it would have liked. In particular, Westminster Cable, which was one of the first operators in the country, delivered a creaky and ramshackle service to the country's opinion formers.
In telephony, the initial advantage enjoyed over the monopoly operator British Telecom has been steadily eroded as BT has been ordered to cut its prices and alternative network operators have joined the scene. The hoped-for enthusiasm for cable telephones was also hit by the massive growth in mobile phones.
Broadband services have been slower than expected to arrive. Premium pricing for such services has also meant consumer take-up has been slow.
