425 1 a05-21423_2425.htm PROSPECTUSES AND COMMUNICATIONS RE: BUSINESS COMBINATION TRANSACTIONS

 

Filed by NTL Incorporated

Pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-6(j)

of the Securities and Exchange Act of 1934

 

Subject Company: Virgin Mobile Holdings (UK) plc

Commission File No. of Virgin Mobile Holdings (UK) plc: 082-34908

Commission File No. of NTL Incorporated: 000-22616

 

Virgin Mobile Holdings (UK) plc shareholders should read any registration statement and prospectus filed or to be filed with the Securities and Exchange Commission, because they contain important information about any potential transaction.  Investors may obtain a free copy of any prospectus, if and when it becomes available, and other documents filed by NTL Incorporated with the SEC, at the SEC’s website at http://www.sec.gov.  Free copies of any prospectus, if and when it becomes available, may be obtained by directing a request to NTL Incorporated, 909 Third Avenue, Suite 2863, New York, New York 10022, Attention: Investor Relations.

 

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Filed by NTL Incorporated

Pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-6(j)

of the Securities and Exchange Act of 1934

 

Subject Company: Virgin Mobile Holdings (UK) plc

Commission File No. of NTL Incorporated: 000-22616

 

Virgin Mobile Holdings (UK) plc shareholders should read any registration statement and prospectus filed or to be filed with the Securities and Exchange Commission, because they contain important information about any potential transaction.  Investors may obtain a free copy of any prospectus, if and when it becomes available, and other documents filed by NTL Incorporated with the SEC, at the SEC’s website at http://www.sec.gov.  Free copies of any prospectus, if and when it becomes available, may be obtained by directing a request to NTL Incorporated, 909 Third Avenue, Suite 2863, New York, New York 10022, Attention: Investor Relations.

 

NTL and Telewest Global

 

UBS Media Conference

 

December 7, 2005

 

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Forward-Looking Statements

 

Certain statements in this document regarding the proposed transaction between ntl Incorporated (“ntl”) and Telewest Global, Inc. (“Telewest”), the expected timetable for completing the transaction, future financial and operating results, benefits and synergies of the transaction, future opportunities for the combined company and products, ntl’s potential offer for Virgin Mobile Holdings (UK) plc, and any other statements regarding Telewest’s or ntl’s future expectations, beliefs, goals or prospects constitute forward-looking statements as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995.  When used in this document, the words “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, and similar expressions or statements that are not historical facts, in each case as they relate to ntl and Telewest, the management of either such company or the proposed transaction, are intended to identify those expressions or statements as forward-looking statements. In addition to the risks and uncertainties noted in this document, there are certain factors, risks and uncertainties that could cause actual results to differ materially from those anticipated by some of the statements made, many of which are beyond the control of ntl and Telewest. These factors relating to the transaction between ntl and Telewest include: (1) the failure to obtain and retain expected synergies from the proposed transaction, (2) rates of success in executing, managing and integrating key acquisitions, including the proposed acquisition, (3) the ability to achieve business plans for the combined company, (4) the ability to manage and maintain key customer relationships, (5) delays in obtaining, or adverse conditions contained in, any regulatory or third-party approvals in connection with the proposed acquisition, (6) availability and cost of capital, (7) the ability to manage regulatory, tax and legal matters, and to resolve pending matters within current estimates, (8) other similar factors, and (9) the risk factors summarized and explained in our Form 10-Ks. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent Form 10-K, 10-Q and 8-K reports.

 

2



 

James Mooney

 

Chairman, NTL

 

3



 

Creating the Triple Play Leader

 

                  Building a Leader

 

                  Transforming scale & competitiveness of UK Cable

                  Access to 12.6m homes, over 50% of UK households

                  £3.4bn in revenues and £1.2bn in OCF

 

                  Triple play champion

                  Wide range of communication, entertainment and information products

                  Enhanced ability to compete with BSkyB, BT and Freeview

                  Focus on product differentiation and innovation

 

                  Driving Value – delivering synergies of £1.5bn NPV

 

                  Strengthen scale and eliminate duplicated activities

                  Significantly cash accretive

 

4



 

Transaction Summary

 

                  Terms

 

                  TLWT shareholders to receive $16.25 in cash and 0.115 NTL shares

                  Cash / stock mix 68% / 32%

 

                  Financing fully committed by existing cash and £1.8bn debt

 

                  Customary closing conditions, including

                  Shareholder approval

                  Satisfactory regulatory outcome

 

                  Expected Timeline (subject to change as dependent on regulatory timings)

 

Proxy Filed

 

OFT

 

SEC

 

Shareholder

 

If cleared by

 

If 2nd stage

 

 

Decision

 

Clearance

 

Meetings

 

OFT:

 

 

 

 

 

 

 

 

 

 

 

 

 

December

 

December

 

January /

 

February /

 

Close

 

Possible Close

 

 

 

 

February

 

March

 

March

 

April/May

 

5



 

Best of Breed Operational Organization

 

Lisa

 

Stephen

 

TBC

 

Neil

 

Jacques

 

Bryan

 

Keith

Opie

 

Cook

 

SVP

 

Berkett

 

Kerrest

 

Hall

 

Monserrat

MD

 

SVP

 

Strategy

 

COO

 

CFO

 

General

 

Director

Flextech

 

Bus Dvpt

 

 

 

 

 

 

 

Counsel

 

Comms

 

 

 

 

 

 

 

 

 

 

 

 

& Policy

 

 

 

 

 

 

 

 

Neil Smith

 

 

 

 

 

 

 

 

 

 

 

 

Deputy CFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stephen

 

Peter

 

Philip

 

Steve

 

Howard

Beynon

 

Wilcock

 

Snalune

 

Upton

 

Watson

MD

 

MD

 

MD

 

MD Networks

 

CTO

Business

 

Customer

 

Consumer

 

 

 

 

 

 

 

 

Sales/Service

 

Products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TBC

 

Carolyn

 

 

 

TBC

 

Mike

 

NTL

 

 

MD

 

Walker

 

 

 

MD

 

Riddle

 

TLWT

 

 

Marketing

 

MD, HR

 

 

 

Logistics

 

CIO

 

New

 

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Cable’s Triple Play Strengths

 

Expertise

 

                  Ten years of triple play experience

 

                  Expertise in marketing and selling bundles

 

                  Triple play institutionalized into customer care, installers engineers, billing, finance etc

 

                  These customers have higher ARPU and lower churn

 

Scale

 

                  30% triple play penetration growing fast

 

                  Scale to leverage content acquisition and hardware/software purchase

 

                  2.7m VOD capable digital STBs, fully funded and already in customer homes

 

                  Robust telephony service already in 4.2m customer homes

 

Technology

 

                  End-to-end state-of-the-art network control

 

                  No reliance on BT or peer-to-peer

 

                  Up to 750 Mhz bandwidth

 

                  Migration to digital drives revenue/capacity

 

                  Range of advanced TV services

 

                  VOD, DVR, HDTV

 

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Bundling Advantage

 

Triple Play Penetration Growth

 

[CHART]

 

Subscriber breakdown

 

BB only 0.3m

 

TV only 0.3m

 

Telephony only 0.7m

 

BB & Telephony 0.6m

 

TV & Telephony 1.5m

 

Triple Play 1.5m

 

Triple-play customers have higher ARPU and margin and lower churn

 

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Broadband Leadership

 

[CHART]

 

[CHART]

 

                  More growth to come

                  UK internet penetration 62%

                  UK broadband penetration 32%

 

                  Compete effectively on service quality, speed and tactical promotions

                  End-to-end network ownership

                  Increasing speeds up to 10Mb with potential for further upgrades

                  Content packages/upgrade paths (eg security suites) provide future growth opportunities

 


(1)          Includes 174k virgin.net subscribers.

 

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TV Strengthened by New Services

 

Increasing TV capability to differentiate from Sky, Freeview, BT and DSL.

Cable is the only platform with the full range of TV services, including free-to-air, basic, premium, VOD, DVR and HDTV

 

[CHART]

 

                  Combined TV penetration of 26%

 

                  Market leader in multichannel TV in area -ahead of Sky and Freeview

 

                  Combined digital penetration of 80%

 

                  New services add competitive strengths and underpin ARPU potential

                  VOD: 57% of digital TV base today

                  DVR: Launch in Q1-06

                  HDTV: Launch in Q1-06

 


(1)          UBS estimates that approximately 20% of Freeview’s subscribers are using the service as a secondary multichannel television offering.

 

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Telephony Migrating to Fixed Pricing Plans

 

UK Cable Talk subscribers (m)

 

[CHART]

 

                  Combined telephony penetration of 35%

 

                  Second in addressable areas, after BT Retail

 

                  Compete effectively on service quality and bundled pricing

 

                  Seeking to counter usage declines by migration to flat rate packages

                  Strengthens gross margin

                  Improves predictability of revenue

 

                  Robust telephony service is important part of bundle

 

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ARPU Differences in UK Cable

 

 

 

NTL

 

Telewest

 

Difference*

 

ARPU

 

£

39.08

 

£

45.17

 

£

6.09

 

RGU/Customer

 

1.96

 

2.14

 

£

2.98

 

Broadband lower tier

 

71

%

49

%

£

0.65

 

Digital Penetration

 

73

%

91

%

£

1.17

 

Talk Penetration

 

29

%

39

%

£

0.92

 

Analogue TV only areas

 

 

 

 

 

£

1.16

 

Other

 

 

 

 

 

£

(0.79

)

 

Merged company to adopt best of breed consistent strategies

 


*                 ARPU Difference assumes NTL had same KPI as Telewest at Q3-05

 

12



 

ARPU Initiatives & Best Practice for UK Cable

 

                  Continued growth in triple play penetration and RGU/customer

                  Bundled marketing and promotions

                  Sales commission structure to emphasis bundle

                  Cross-sell to existing customers

                  Migrating telephony customers to higher ARPU Talk plans

                  Increased TV capability

                  VOD, DVR and HDTV

                  Continued migration from analogue to digital

                  Upsell and mix initiatives

                  Take fully loaded cash flow view ensuring attractive cash flow economics

                  Application of tight and consistent credit policy

                  Customer segmentation analysis

                  Centers of Excellence to improve customer experience

 

13



 

Leverage Merged Network for Business Growth

 

[CHART]

 

                  Second in addressable areas for profitability and cashflow

                  Compete effectively on service quality

                  Locally based account managers

                  Leverage consumer network

                  Deeper local network so carry more traffic on-net

                  Produce stronger cashflow and margin

                  Focus on on-net traffic, data and value added services

                  Merged Business division will have greater access to on-net business, increasing reach, scale, competitiveness and margin

 

14



 

Strategically Valuable Content Assets

 

                  Wholly owned Flextech channels

                  LIVINGtv, Trouble, Bravo and Challenge on NTL, Telewest and Sky

                  Advertising revenue up 29% and subscription revenue up 10%

                  50:50 UKTV JV with the BBC

                  10 branded channels with exclusive access to key BBC content

                  Significantly cash generative with £28m paid to Telewest year-to-date

                  Sit-up

                  Two main auction channels with price-drop auction format

                  Transactional revenue up 16% although margins being squeezed

 

                  Currently investigating strategic options

                  Retain 100% ownership

                  Strategic partnerships

                  Partial divestment for potential de-leveraging

 

15



 

Possible Transaction with Virgin Mobile

 

                  As you have all read in the news, NTL announced a potential transaction which would involve acquiring Virgin Mobile and entering into a license arrangement with Virgin Enterprises

 

                  NTL will not provide any comments on the proposed transaction beyond the information provided in its press release

 

                  Any such transaction is governed by UK Takeover Panel Rules and US securities laws and accordingly the public should understand the customary approach of providing no comment on the matter

 

                  Discussions are preliminary and subject to satisfaction of certain conditions, including due diligence

 

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Potential Offer for Virgin Mobile

 

NTL has announced the following:

 

                  Virgin Mobile shareholders would be offered .09298 shares of ntl common stock per share of Virgin Mobile and a full cash alternative at 323p.

 

                  The potential share offer values Virgin Mobile at 323p based on ntl’s closing price on 2 December 2005.

 

                  Virgin Group has given verbal assurances that, if a transaction proceeds, it intends to elect to exchange its stake in Virgin Mobile for a continuing equity participation in the ntl Group although it has reserved the right to take a small portion in cash.

 

                  T-Mobile, Virgin Mobile’s network provider, has also indicated that it is supportive of the proposed combination.

 

                  ntl is in discussions with Virgin Enterprises to extend its existing license for the Virgin name (now covering virgin.net) to cover television and fixed line and mobile telephony.

 

                  If the proposed transactions are completed, ntl would use the Virgin brand to offer a quadruple play

 



 

NTL Integration Efforts

 

                  Telewest synergies are reported assuming no potential transaction with Virgin Mobile

 

                  Integration of Merger should not be materially disrupted by integration of any other transaction, including potential Virgin Mobile transaction

 

                  For example, Virgin.net has been kept as an essentially standalone business

 

                  Integration with Telewest offers opportunity to rebrand anyway

 

                  Virgin Mobile is not required to be integrated in order to achieve the Telewest integration synergies

 



 

Neil Smith

 

Chief Financial Officer, Telewest

 

 

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[LOGO]

 

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Planning First Class Integration

 

Objectives

 

I.                 Leverage increased scale to underpin growth

 

II.             Realise synergies efficiently and effectively

 

III.         Establish the organisation, processes and systems

 

                  Day-to-day integration effort led by

                  Neil Smith, CFO of Telewest

                  ShaiWeiss, MD Products, NTL Consumer

                  Eleven merger workstreams identified with individual leaders

                  Five support functions

 

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Key Projects

 

87 projects already identified to implement the integration program

 

Operational

 

Synergy

 

Strategic

 

 

 

 

 

 

 

Reporting

 

Cost of Sale

 

Culture and People

 

 

 

 

 

 

 

Single ERP System

 

Duplicated Overhead

 

Brand

 

 

 

 

 

 

 

HR Policies

 

Installs

 

Product Harmonization

 

 

 

 

 

 

 

Compliance

 

Contact Centers

 

Single Billing Platform

 

 

 

 

 

 

 

Day One

 

Purchasing

 

Optimal Processes

 

 

Aim to capture the best of both worlds e.g.

 

                              NTL bad debt policy and practices evolve to be in line with Telewest – equates to a reduction in bad debt charge of 0.5%-1.0% of revenue

                              Increase efficiency of service techs to NTL ratio of 11 jobs per day compared to 7 jobs per day at Telewest

                              Increased triple / dual installations will significantly reduce installation cost per RGU

 

21



 

Significant Value Creation from Synergies

 

 

 

Area

 

Drivers

 

NPV of
Synergies
(1)

 

Synergies

 

 

 

 

 

 

 

 

Cost of Sales

 

•     Reduction of interconnect charges and programming costs

 

Approx £1.5bn

 

 

 

 

 

 

[CHART]

 

 

Operating

 

•     Scale benefits and best practices

 

 

 

Costs

 

•     Consolidation of central functions

 

 

 

 

 

 

 

 

 

Other SG&A

 

•     Consolidation of infrastructure, systems and platforms

 

 

 

 

 

 

 

 

 

 

 

•     Procurement savings

 

 

 

Capex

 

•     Single core network

 

 

 

 

 

•     Single product deployments

 

 

 

Implementation

 

 

Gross synergies realized from 2006, achieving run rate in 2009

& Transaction

 

 

Well-developed implementation plan

Costs

 

 

Anticipated implementation costs of £250m 2006 – 2008

 

 

 

Professional and legal fees are not included in implementation costs

Targets

 

 

Cash synergies run-rate exiting 2008 of approximately £250m, with slight increase in 2009

 

 

 

OCF(2) margins of over 40%

 


(1)                                 After implementation costs.

(2)                                 Defined as operating income before depreciation, amortization and other charges.

 

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Phasing of Cost Synergies

 

 

 

Yr 1(1)

 

Yr 2

 

Yr 3

 

Exit Rate

 

 

 

 

 

 

 

 

 

 

 

EBITDA impacting:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost savings

 

60 - 80

 

135

 

185

 

 

 

 

 

 

 

 

 

 

 

 

 

4th quarter run rate

 

85

 

140

 

200

 

200

 

 

 

 

 

 

 

 

 

 

 

Costs to capture

 

(60) - (80)

 

(45)

 

(20)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Capex impact

 

(25)

 

10

 

40

 

50

 

 

 

 

 

 

 

 

 

 

 

Total Cash flow impact

 

(5) - (45)

 

100

 

205

 

250

 

 

                              Current estimated view of synergy phasing derived from collaboration phase of integration

                              £250m of annualized cash savings as we exit year 3, with slight increase thereafter

                              Significant revenue synergies also anticipated – not included in these numbers

 


(1)                                 Note: Year 1 commences at the completion of the transaction

 

23



 

Creating the Triple Play Leader

 

                  Transforming the scale and competitiveness of UK Cable

 

                  Strategic focus on product differentiation and innovation

 

                  Triple play champion with unique capabilities and strengths

 

                  Leverage strategic control of valuable content assets

 

                  Substantial value creation from merger

 

                  Clear implementation plan to harness best of both companies

 

24



 

Cautionary Statement Regarding Synergies

 

The information contained in the discussion of synergies set forth above is subjective in many respects and therefore is susceptible to various interpretations. The discussion of synergies reflects numerous assumptions made by the management of ntl and Telewest with respect to the speed and the scale of delivery, all of which are difficult to predict and many of which are beyond ntl’s and Telewest’s control.  ntl and Telewest cannot predict whether the assumptions made in preparing the discussion of synergies will prove accurate. While presented with numeric specificity, the discussion of synergies is inherently imprecise, and ntl and Telewest can give no any assurance that the anticipated synergies will match those actually achieved, which may ultimately be materially higher or lower than those discussed above.  The provision of this information should not be regarded as an indication that ntl, Telewest or any third parties consider such information to be a reliable prediction of future events, and this information should not be relied on as such.

 

ntl and Telewest do not intend to, and specifically disclaim any duty to, update the discussion of synergies, even if any or all of the underlying assumptions are shown to be in error or if there is any change that would warrant any such update.

 

Telewest did not participate in the preparation of the discussion of ntl’s potential offer for Virgin Mobile Holdings (UK) plc, and has no responsibility for that discussion.

 

The discussion of synergies was not prepared in compliance with any regulations or guidelines promulgated by the U.S. Securities and Exchange Commission (including Item 10 of Regulation S-K of the SEC) or the American Institute of Certified Public Accountants relating to the presentation of financial information, nor was it prepared in accordance with U.S. GAAP.  The discussion of synergies contains “non-GAAP financial measures” within the meaning of Item 10(e) of Regulation S-K that have not been reconciled with GAAP financial measures.  Neither ntl’s nor Telewest’s auditors nor any other independent accountants have compiled, examined or performed any procedures with respect to the information contained in the discussion of synergies.  In addition, neither ntl’s or Telewest’s auditors nor any other independent accountants have expressed any opinion or any other form of assurance with respect to this information or its achievability, and assume no responsibility for, and disclaim any association with, this information.

 

For all of the reasons noted above, we strongly caution you not to place undue reliance on the discussion of synergies.

 

25



 

Additional Information and Where to Find it

 

http://ntltelewest.mergerannouncement.com

 

This presentation may be deemed to be solicitation material in respect of the proposed merger of ntl and Telewest.  In connection with the proposed merger, ntl and Telewest will file a joint proxy statement / prospectus with the U.S. Securities and Exchange Commission (the “SEC”).  INVESTORS AND SECURITY HOLDERS OF NTL AND TELEWEST ARE ADVISED TO READ THE JOINT PROXY STATEMENT / PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER.  The final joint proxy statement / prospectus will be mailed to stockholders of ntl and Telewest.  Investors and security holders may obtain a free copy of the joint proxy statement / prospectus, when it becomes available, and other documents filed by ntl and Telewest with the SEC, at the SEC’s web site at http://www.sec.gov .  Free copies of the joint proxy statement / prospectus, when it becomes available, and each company’s other filings with the SEC may also be obtained from the respective companies.  Free copies of ntl’s filings may be obtained by directing a request to ntl Incorporated, 909 Third Avenue, Suite 2863, New York, New York 10022, Attention: Investor Relations.  Free copies of Telewest’s filings may be obtained by directing a request to Telewest Global, Inc., 160 Great Portland Street, London W1W 5QA, United Kingdom, Attention: Investor Relations.

 

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

 

26



 

Participants in the Solicitation relating to the Transaction Between ntl and Telwest

 

ntl, Telewest and their respective directors, executive officers and other members of their management and employees may be deemed to be soliciting proxies from their respective stockholders in favour of the merger. Information regarding ntl’s directors and executive officers is available in ntl’s proxy statement for its 2005 annual meeting of stockholders, which was filed with the SEC on April 5, 2005. Information regarding Telewest’s directors and executive officers is available in Telewest’s proxy statement for its 2005 annual meeting of stockholders, while was filed with the SEC on April 11, 2005. Additional information regarding the interests of such potential participants will be included in the joint proxy statement / prospectus and the other relevant documents filed with the SEC when they become available.

 

Potential ntl Offer for Virgin Mobile Holdings (UK) plc

 

Virgin Mobile Holdings (UK) plc shareholders should read any prospectus filed or to be filed with the Securities and Exchange Commission, because they contain important information about any potential transaction.  Investors may obtain a free copy of any prospectus, if and when it becomes available, and other documents filed by NTL Incorporated with the SEC, at the SEC’s website at http//www.sec.gov.  Free copies of any prospectus, if and when it becomes available, may be obtained by directing a request to NTL Incorporated, 909 Third Avenue, Suite 2863, New York, New York 10022, Attention: Investor Relations.

 

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