-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZRW9tfHvLDeNsx9XFseE5XgerwmrpynqyKM63BsFvc20gIUNL0CyYOX4IZdroHV VpScVVYGq4G11FLYX3lzeg== 0000950123-97-002649.txt : 19970329 0000950123-97-002649.hdr.sgml : 19970329 ACCESSION NUMBER: 0000950123-97-002649 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEWEST COMMUNICATIONS PLC /NEW/ CENTRAL INDEX KEY: 0000949606 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 000000000 STATE OF INCORPORATION: X0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26840 FILM NUMBER: 97566452 BUSINESS ADDRESS: STREET 1: GENESIS BUSINESS PARK STREET 2: ALBERT DR WOKING CITY: SURREY GU21 5RK ENGL STATE: X0 BUSINESS PHONE: 1483750900 MAIL ADDRESS: STREET 1: GENESIS BUSINESS PARK STREET 2: ALBERT DRIVE WOKING CITY: SURREY STATE: X0 FORMER COMPANY: FORMER CONFORMED NAME: TELEWEST PLC DATE OF NAME CHANGE: 19950821 10-K 1 TELEWEST COM ANNUAL REPORT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1996 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From To COMMISSION FILE NUMBER: 0-26840 TELEWEST COMMUNICATIONS PLC (Exact Name of Registrant as Specified in Its Charter) --------------------- ENGLAND AND WALES N/A (State or Other (I.R.S. Employer Jurisdiction of Identification Number) Incorporation or Organization) GENESIS BUSINESS PARK ALBERT DRIVE WOKING, SURREY GU21 5RW UNITED KINGDOM 011-44-1483-750-900 (Address of Principal Executive Offices) Securities Registered Pursuant to Section 12(b) of the Act: NONE Securities Registered Pursuant to Section 12(g) of the Act: AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS, EACH REPRESENTING TEN ORDINARY SHARES OF 10P EACH (Title of Class) ORDINARY SHARES OF 10P EACH (Title of Class) 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 [X] NO [_] INDICATE BY CHECK MARK IF DISCLOSURE OF 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. [_] AT MARCH 1, 1997, 927,567,600 ORDINARY SHARES OF 10P EACH WERE OUTSTANDING AND THE AGGREGATE MARKET VALUE OF THE ORDINARY SHARES ON THE LONDON STOCK EXCHANGE ON SUCH DATE HELD BY NON-AFFILIATES OF THE REGISTRANT WAS APPROXIMATELY (POUND)299,073,917. DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 ARE INCORPORATED BY REFERENCE INTO PART II. PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT, DATED MARCH 26, 1997, TO BE DELIVERED TO SHAREHOLDERS IN CONNECTION WITH THE 1997 ANNUAL GENERAL MEETING OF SHAREHOLDERS, ARE INCORPORATED BY REFERENCE INTO PART III. 2 FORM 10-K TABLE OF CONTENTS PART I Page Item 1. Business............................................................................................... 3 Item 2. Properties.............................................................................................50 Item 3. Legal Proceedings......................................................................................50 Item 4. Submission of Matters to a Vote of Security Holders....................................................50 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters..................................52 Item 6. Selected Financial Data................................................................................59 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................59 Item 8. Consolidated Financial Statements and Supplementary Data...............................................59 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................60 PART III Item 10. Directors and Executive Officers of the Registrant....................................................60 Item 11. Executive Compensation................................................................................60 Item 12. Security Ownership of Certain Beneficial Owners and Management........................................60 Item 13. Certain Relationships and Related Transactions........................................................60 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................60
3 PART I INTRODUCTORY NOTES: Telewest Communications plc, formerly known as Telewest plc (the "Company"), was formed for the purpose of acquiring the issued share capital of Telewest Communications plc ("Old Telewest") and SBC CableComms (UK) ("SBCC") in connection with the merger of Old Telewest and SBCC on October 3, 1995 (the "Merger"). Prior to the Merger with SBCC, Old Telewest was a publicly traded company traded on the London Stock Exchange and SBCC was a private company owned by affiliates of SBC Communications, Inc. ("SBC") and an affiliate of Cox Communications, Inc. ("Cox"). In connection with the Merger (a) all of the issued share capital of Old Telewest and SBCC were exchanged for shares of the Company, (b) Old Telewest and SBCC became wholly-owned subsidiaries of the Company (and currently are indirect wholly-owned subsidiaries), and (c) the Company became a publicly traded company (with its Ordinary Shares traded on the London Stock Exchange under the symbol "TWT" and American Depositary Shares ("ADSs") representing its Ordinary Shares traded on the Nasdaq National Market under the symbol "TWSTY"). All references to the Company prior to completion of the Merger are to Old Telewest or its predecessor business, TCI/U S WEST Cable Communications Group (a joint venture (the "Joint Venture") between affiliates of Tele-Communications, Inc. ("TCI") and affiliates of U S WEST, Inc. ("U S WEST") that owned and operated cable television and telephony businesses in the U.K. and was contributed to Old Telewest in connection with its initial public offering (the "Initial Public Offering") in November 1994. Unless otherwise indicated, the information contained in this Report (e.g., number of equity homes) does not reflect the franchise covering the Lothian area (with approximately 30,000 homes), which was awarded to the Company on March 20, 1997. References in this document to homes "passed" are to homes in respect of which network construction has been completed, and references to homes "passed and marketed" are to homes passed where marketing has commenced. References in this document to the number of "equity homes," "equity homes passed," "equity businesses," equity customers" and "equity lines" are to the number of homes, businesses, customers or lines, respectively, within franchises owned by a company multiplied by such company's effective equity interest in such franchises (e.g., a franchise with 100 homes in which such company has an effective interest of 25% would represent 25 equity homes for such company). Unless otherwise indicated in this document, "equity homes," "equity homes passed," "equity businesses," "equity customers" and "equity lines" are calculated for the purposes of this document for all periods on the basis of a company's effective interest in its franchises as at the date of this document. Unless the context requires otherwise, references in this document to the Company do not include the Affiliated Companies (as defined herein). All information with respect to the number of homes and businesses in a franchise area is based on the most recent published U.K. census data (1991) with respect to homes and the relevant company's estimates with respect to businesses. All information with respect to the number of homes "passed" or "passed and marketed" is based on physical counts made by the relevant company during the network construction or marketing phases (or in the case of homes acquired after network construction or marketing was completed by another operator, based on the records of such operator). All information with respect to the number of homes in an Affiliated Franchise (as defined herein) is based on the most recent published U.K. census data (1991), and all other information concerning the Affiliated Companies has been provided by (or derived from data provided by) the Affiliated Companies. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS: All statements other than statements of historical fact included in this document, including without limitation the statements incorporated herein from the Company's 1996 Annual Report and 1997 Proxy Statement are, or may be deemed to be, forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Important factors that could cause actual results to differ materially from those 1 4 discussed in such forward-looking statements include, among other things, the extent consumer preference develops for cable television over other methods of providing in-home entertainment and for the Company as a viable alternative to British Telecommunications plc ("BT") (as defined) and others as a provider of telephony service; the ability of the Company to manage growth and expansion; the ability of the Company to construct its network in a cost efficient and timely manner; the ability of the Company to raise additional financing if there is a material adverse change in the Company's anticipated revenues or expenses or to finance new initiatives; the ability of the Company to respond to changes or increases in competition (including the introduction of digital services by BSkyB (as defined) or other operators) and adverse changes in government regulation; the extent programming is available at reasonable costs; adverse changes in the price of telephony interconnection; disruptions in supply of services and equipment, and the performance of the Affiliated Companies (as defined herein) (which are not controlled by the Company). All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements. 2 5 1. BUSINESS The Company is a leading provider of cable television and residential and business cable telephony services in the U.K. The Company owns and operates 26 cable franchises (the "Owned and Operated Franchises") and has minority equity interests in three U.K. cable operators (the "Affiliated Companies"), which own and operate seven additional franchises (the "Affiliated Franchises"). As of December 31, 1996, the Owned and Operated Franchises and the Affiliated Franchises covered approximately 24% of the homes in the U.K. in areas for which cable franchises have been awarded. The Owned and Operated Franchises and the Affiliated Franchises together include approximately 5.1 million homes and approximately 344,000 businesses, of which approximately 4.3 million and approximately 290,000 are the Company's equity homes and equity businesses, respectively. As of December 31, 1996, the Company's network in such franchises had passed approximately 2,892,000 of the Company's equity homes (approximately 2,626,000 of which had been passed and marketed) and the Company had approximately 600,000 equity cable television customers, 694,000 equity residential telephone lines and 79,000 equity business telephone lines. The Company's 26 Owned and Operated Franchises, which include approximately 3.9 million homes, are managed in seven Regional Franchise Areas: London South (including Croydon, Kingston and Richmond), Scotland (including Dundee, Edinburgh and Perth), North East (including Gateshead and Newcastle upon Tyne), South East (including Basildon, Chelmsford and Gravesend), Avon and Cotswolds (including Bath, Bristol, Cheltenham and Gloucester), North West (including St. Helens and Knowsley, Wigan, Preston, Southport, North and South Liverpool and Blackpool) and Midlands (including Telford, Dudley, Wolverhampton, Walsall, Worcester and Kidderminster). The seven Affiliated Franchises include approximately 1.2 million homes and provide the Company with an additional 396,000 equity homes. The Affiliated Franchise areas include Birmingham, parts of North London and Windsor. The Company provides a wide variety of cable television, cable telephony and on line services. Such services are provided over a hybrid fibre-coaxial network (i.e., high capacity broadband) which has been designed to enable the Company to provide customers with a wide range of interactive and integrated entertainment, telecommunications and information services as they become available in the future. The Company currently provides analogue services over the network, and expects to begin introducing digital services over the network by the end of 1997. Such digital services are expected to include pay-for-view programming, near-video-on-demand ("NVOD"), cable television Internet access, electronic mail and home shopping and banking. As of December 31, 1996, network construction was completed for approximately 65% of the homes in the Owned and Operated Franchises and 80% of the Affiliated Franchises and approximately (pound)1,592 million had been invested in the construction of the network of the Owned and Operated Franchises and (pound)665 million had been invested in the construction of the networks of the Affiliated Franchises (in each case including the costs of cable, ducting, network electronic equipment and subscriber connections). The Company anticipates that network construction will be completed for more than 78% of the homes in the Owned and Operated Franchises and 92% 3 6 of the Affiliated Franchises by December 31, 1997 and expects that the remaining construction of the networks will be substantially completed by the end of 2000. In addition to the construction of a hybrid fibre-coaxial network in each of its franchises, the Company is developing an inter-franchise network to link the individual networks of the Owned and Operated Franchises and the Affiliated Franchises (the "Interfranchise Network"), carrying voice, data and video traffic between the franchises. The Interfranchise Network is expected to provide a number of benefits to the Company, including increased telephony margins resulting from reduced payments of interconnection fees to national carriers for domestic long distance calls. The Interfranchise Network is scheduled to be 75% complete by the end of 1997, with completion planned for the middle of 1998. The following table sets forth certain data concerning the Owned and Operated Franchises and Affiliated Franchises at and for the years ended December 31, 1994, 1995 and 1996. Except as otherwise noted in the footnotes to this table, all information with respect to SBCC is included only from and after October 3, 1995 (the date of completion of the Merger).
Owned and Operated Affiliated Franchises Franchises(1) ---------------------------------------------- ---------------------------------------- 1994 1995 1996 1994 1995 1996 ---- ---- ---- ---- ---- ---- CABLE TELEVISION Homes passed................... 893,372 1,987,344 2,575,142 173,736 242,415 316,878 Homes passed and marketed...... 805,475 1,831,458 2,335,953 167,393 235,196 290,276 Basic customers................ 179,096 401,469 528,142 45,477 56,003 71,457 Basic penetration rate (2)..... 22.2% 21.9% 22.6% 27.2% 23.8% 24.6% Average monthly revenue per customer (3)................. (pound)21.33(4) (pound)21.32(4) (pound)22.95 (pound)17.94 (pound)19.16 (pound)20.35 Average churn rate ............ 47.1%(5)(6) 41.0%(5)(6) 33.4%(7) 37.1%(5)(6) 31.5%(5)(6) 28.9%(7) RESIDENTIAL TELEPHONY Homes passed................... 658,150 1,750,288 2,396,658 162,284 237,940 299,603 Homes passed and marketed...... 580,708 1,652,604 2,254,734 155,372 229,956 287,701 Residential customers.......... 128,149 429,405 620,377 34,223 48,250 65,724 Penetration rate (8)........... 22.1% 26.0% 27.5% 22.0% 21.0% 22.8% Residential lines connected.... 128,530 430,926 627,009 34,443 48,549 66,512 Average monthly revenue per line (9).....................(pound)24.16 (10) (pound)20.48 (10) (pound)20.26 (pound)27.33 (pound)27.25 (pound)27.05 Average churn rate per line.... 17.7%(11)(12) 21.8%(11)(12) 19.6%(7) 26.5%(11)(12) 23.8%(11)(12) 25.8%(7) BUSINESS TELEPHONY Business customers............. 5,082 14,225 20,882 1,312 1,760 2,416 Business lines connected....... 15,560 40,021 67,823 5,357 7,496 10,746 Average number of business lines per customer (13)........ 3.1 2.8 3.2 4.1 4.3 4.4 Average monthly revenue per line (14)....................(pound)67.66(15) (pound)58.92(15) (pound)54.50 (pound)86.76 (pound)75.39 (pound)71.95 Average churn rate per line (16)........................... 11.0%(16)(17) 12.4%(16)(17) 14.5%(7) 22.6%(16)(17) 25.0%(16)(17) 24.8%(7) [TABLE RESTUBBED FROM ABOVE] Total(1) ----------------------------------- 1994 1995 1996 ---- ---- ---- CABLE TELEVISION Homes passed................... 1,067,108 2,229,759 2,892,020 Homes passed and marketed...... 972,868 2,066,654 2,626,229 Basic customers................ 224,573 457,472 599,599 Basic penetration rate (2)..... N/A N/A N/A Average monthly revenue per customer (3)................. N/A N/A N/A Average churn rate ............ N/A N/A N/A RESIDENTIAL TELEPHONY Homes passed................... 820,434 1,986,228 2,696,261 Homes passed and marketed...... 736,080 1,882,559 2,542,435 Residential customers.......... 162,372 477,655 686,101 Penetration rate (8)........... N/A N/A N/A Residential lines connected.... 162,973 479,465 693,521 Average monthly revenue per line (9)..................... N/A N/A N/A Average churn rate per line.... N/A N/A N/A BUSINESS TELEPHONY Business customers............. 6,394 15,986 23,298 Business lines connected....... 20,917 47,518 78,569 Average number of business lines per customer (13)........ N/A N/A N/A Average monthly revenue per line (14).................... N/A N/A N/A Average churn rate per line (16)........................... N/A N/A N/A
4 7 Notes: "N/A" means not applicable. (1) Information with respect to Affiliated Franchises reflects the Company's equity interest therein. (2) Cable television basic penetration rate at a specified date represents (i) the total number of cable television basic customers at such date, divided by (ii) the total number of homes passed and marketed for cable television at such date. (3) Average monthly revenue per customer for each period represents (i) one-twelfth of the total cable television revenue for such period, divided by (ii) the average number of basic cable television customers in such period. (4) If the Merger had been completed on January 1, 1994, the average monthly revenue per subscriber would have been (pound)19.64 and (pound)21.11 in 1994 and 1995, respectively. (5) Average cable television churn rate for the period represents (i) the total number of cable television customers who terminated basic service or whose service was terminated by the Company during such period, divided by (ii) the average number of basic cable television customers in such period. (6) If the Merger had been completed on January 1, 1994, the average cable television churn rate would have been 52.6% and 44.5% in 1994 and 1995, respectively. (7) Prior to 1996, the calculation of churn included those customers who moved homes and reconnected elsewhere in one of the Owned and Operated or Affiliated Franchises and consequently overstated customer dissatisfaction with the service provided. In 1996, the Company revised the basis on which "churn" is calculated to exclude those customers who moved their cable service from one premises to another within one of the Owned and Operated Franchises. Average churn rate for 1996 represents (i) the total number of customers who voluntarily or involuntarily terminated service during such period, divided by (ii) the average number of customers in such period. (8) Residential telephony penetration rate at a specified date represents (i) the total number of residential cable telephony customers at such date, divided by (ii) the total number of homes passed and marketed for residential cable telephony at such date. (9) Average monthly revenue per residential line for each period represents (i) one-twelfth of the total residential cable telephony revenue for such period, divided by (ii) the average number of residential cable telephony lines in such period. (10) If the Merger had been completed on January 1, 1994, the average monthly revenue per line would have been (pound)21.43 and (pound)20.69 in 1994 and 1995, respectively. 5 8 (11) Average residential telephony churn rate per line for the period represents (i) the total number of residential cable telephony lines terminated by customers or the Company during such period, divided by (ii) the average number of residential cable telephony lines in such period. (12) If the Merger had been completed on January 1, 1994, the average residential telephony churn rate per line would have been 19.9% and 21.8% in 1994 and 1995, respectively. (13) Average number of business lines per customer at a specified date represents (i) the number of business cable telephony lines at such date, divided by (ii) the number of business cable telephony customers at such date. (14) Average monthly revenue per business line for each period represents (i) one-twelfth of the total business cable telephony revenue for such period, divided by (ii) the average number of business cable telephony lines in such period. (15) If the Merger had been completed on January 1, 1994, the average monthly revenue per line would have been (pound)63.72 and (pound)59.39 in 1994 and 1995, respectively. (16) Average business telephony churn rate per line for each period represents (i) the total number of business cable telephony lines terminated by customers or the Company during such period, divided by (ii) the average number of business cable telephony lines in such period. (17) If the Merger had been completed on January 1, 1994, the average churn rate per line would have been 14.9% and 13.1% in 1994 and 1995, respectively. RECENT DEVELOPMENTS The Company's business has grown and developed significantly since the consummation of the Company's merger with SBCC in October 1995. The Owned and Operated Franchises and Affiliated Franchises now include more than 24% of the U.K. homes in areas covered by cable licenses. One of every three homes passed by the networks of the Owned and Operated Franchises now subscribe for one or more of the Company's services and more than 49% of the Company's customer's subscribe for both cable television and cable telephony services. In 1996, the number of Company customers increased by more than 34%, from 588,390 at December 31, 1995 to 789,637 at December 31, 1996, and during the year the number of cable television customers increased by 32%, the number of residential telephony lines increased by 45% and the number of business telephone lines increased by 69%. Residential telephony penetration increased by 1.5% in 1996 to 27.5% and revenues from the Company's rapidly expanding business telephony service increased by 68% to (pound)34.6 million (on a pro forma basis assuming the Merger had been consummated on January 1, 1995). Although the cable television penetration remained constant for most of the year, there was an increase in such penetration at the end of the fourth quarter to 22.6% from 21.2% at the end of the third quarter primarily as a result of the roll-out of Teleplus, the Company's bundled cable television and cable television services. 6 9 The Company's revenues increased significantly in 1996 to (pound)290.3 million from (pound)144.8 million in 1995, reflecting primarily the inclusion of the SBCC results for the full year in 1996 and an increase in customers resulting from the Company's continued network construction and aggressive marketing efforts. In addition, the Company achieved positive EBITDA (earnings before share of net losses of affiliates, interest, taxes, depreciation and amortization) for the three month period ended December 31, 1996. CABLE TELEVISION Overview The Company, through its predecessor companies, began offering cable television in the U.K. in 1985. The Company derives its cable television revenues from connection charges, monthly basic and premium service fees, "pay-per-view" program fees, cable publications and advertising charges. As at December 31, 1996 the Company had passed and marketed approximately 2,335,953 of the 2,575,142 homes passed in the Company Owned and Operated Franchises and had a cable television penetration rate of approximately 22.6%. Programming The Company currently offers more than 40 channels to its customers as part of its basic service and more than 12 channels as part of its premium service offering (including bonus channels provided in connection with the subscription for certain premium channels). The Company obtains its programming from a variety of sources, including satellite operators, terrestrial broadcasters and other programming suppliers. The Company generally arranges its programming so that the same programming appears on the same channel number in each of the Regional Franchise Areas, thereby facilitating the use of the same marketing materials (including monthly programming guides such as "The Cable Guide") across the Regional Franchise Areas. Customers can choose to receive basic service programming alone or together with premium programming. The following table sets out the basic and premium service programming currently offered by the Company (most of which is carried on dedicated channels and some of which is carried on shared channels): 7 10
PROGRAMMING DESCRIPTION ----------- ----------- BASIC SERVICE - ------------- NEWS AND INFORMATION Arcade Local text advertisements Bloomberg Information Television Business news Cable 17 Local information, lifestyle and news Channel One News and information for the London area Channel One Avon News and information for the Avon area Channel One Liverpool News and information for the Liverpool area CNN International (1) 24-hour international news service EBN(1)(2) European business news Euronews European news service The Parliamentary Channel (1)(3) Live coverage of Parliament Sky News (2)(4) 24-hour U.K. news service The Channel Guide Summary of programming schedule GENERAL INTEREST BBC1 Terrestrial television BBC2 Terrestrial television Bravo (1)(2) Cult films and television series Channel 4 Terrestrial television Channel 5 (5) Terrestrial television Eurosport International sporting events ITV Terrestrial television Live TV (6) Live entertainment and local programming Live Liverpool Live entertainment and local programming Live Edinburgh Live entertainment and local programming NBC U.S. and world news and entertainment QVC (2) Home shopping Sci Fi Channel Science fiction programming Carlton Food Network Culinary programming Carlton Select Comedy and drama Sky One (2)(4) Films and general entertainment programming Sky Two (2)(4) General entertainment programming Sky Soap (2)(4) Soap operas Sky Travel (2)(4) Travel programming The Discovery Channel (1)(2) Documentary programming Challenge TV (1)(2) Family programming The History Channel (2)(4) Biographical and historical programming
8 11
PROGRAMMING DESCRIPTION ----------- ----------- TLC - The Learning Channel (1)(2) Educational programming Travel Travel programming TNT (1) Classic films UK Gold (1)(2) Classic U.K. television programming Granada Plus (2) General entertainment and classic UK programming Granada Men and Motoring (2) Automotive lifestyle channel Granada Good Life (2) Leisure and lifestyle channel Granada Talk TV (2) Talkshows on TV UK Living (1)(2) Lifestyle programming The Paramount Channel General entertainment CHILDREN Nickelodeon (2) Children's entertainment The Cartoon Network (1) Children's cartoons TCC (1)(2) Children's entertainment INTERNATIONAL Asianet Programming relating to the Asian subcontinent Deutsche Welle German language programming RAI UNO Italian language programming TVE International Spanish language programming TV5 French language programming CNE Chinese language programming MUSIC Country Music Television Europe (2) Country music videos MTV (2) Music videos Performance - The Arts Channel Classical music and opera The Box Music videos selected by customer requests The Landscape Channel Classical music accompanying scenic videos VH-1 (2) Music videos for the 25-49 year old age group PREMIUM SERVICE - --------------- GENERAL INTEREST The Disney Channel (2) Family and children's entertainment ZEE TV Asian language SPORTS Sky Sports (2)(4) U.K. and international sports Sky Sports 2 (2)(4) U.K. and international sports Sky Sports 3(2)(4) U.K. and international sports
9 12
PROGRAMMING DESCRIPTION ----------- ----------- The Racing Channel Live horse racing MOVIES HVC Adult action, adventure and horror films Playboy Television (1)(2) Adult entertainment Sky Movies (2)(4) 24-hour feature films Sky Movies Gold (2)(4) Classic films Television X Adult entertainment The Adult Channel Adult entertainment The Movie Channel (2)(4) 24-hour feature films ___________________________ Notes: (1) TCI, U S WEST or Cox (or their affiliates) own interests in or manage the provider of this programming. (2) Programming distributed or marketed by British Sky Broadcasting Group or its affiliates ("BSkyB"). (3) The Company owns an interest of approximately 27% in the provider of this programming. (4) Programming acquired from BSkyB. (5) In December 1995, the ITC awarded a license for a fifth terrestrial broadcast channel, Channel 5. Channel 5, which carries a mix of general entertainment programming, commences broadcasting in March, 1997. (6) Live TV is provided by Live TV Ltd., whose ultimate owner is part of The Mirror Group plc, a leading U.K. newspaper publisher. Lord Borrie QC (a director of the Company) is a director of The Mirror Group plc. CPP-1, a joint venture of affiliates of TCI, U S WEST and SBC, together with three other U.S. companies with interests in U.K. cable operators, has a 10% interest in Live TV.
The Company's basic service also includes a wide range of terrestrial and satellite radio stations and, where available, NICAM stereo audio feeds for television channels. In addition, the Company also offers multi-channel, digital, audio-only services to business customers (including one service in which an affiliate of TCI has a 49% interest). As part of its strategy to offer customers a broader range of entertainment and to increase revenues, in 1996 the Company introduced its first two "pay-per-view" programs (the Frank Bruno v. Mike Tyson boxing match in March 1996 and the Mike Tyson v. Evander Holyfield 10 13 boxing match in November 1996). More than 14% of the Company's customers subscribed to the Bruno v. Tyson fight and 8% of the Company's customers subscribed to the Holyfield v. Tyson fight. Based on this strong customer interest, the Company intends to carry other "pay-per-view" programs in the future as other opportunities become available. Source of Programming. The Company obtains most of its programming from suppliers pursuant to arrangements that run for periods from six months to ten years. The arrangements generally provide for payments by the Company based on the number of its customers subscribing to that particular channel. In many cases, the per subscriber charges for the Company decrease as the number of its customers subscribing to that channel increases. The Company and the Affiliated Companies contract together for some program channels, which increases the aggregate number of contract customers and thereby reduces the cost per subscriber. Under the terms of its PDSLs (as defined herein), the Company is also required to provide its customers with certain specified terrestrial television services without charge. The Company obtains a significant amount of its programming from BSkyB, a leading supplier of cable programming in the U.K. and the exclusive supplier of certain programming. Its programming generally is popular in the U.K. and is important in terms of attracting and retaining cable television customers. In April 1995, Old Telewest entered into a new seven-year contract with BSkyB (the "BSkyB Contract") that will expire in April 2002. Pursuant to the terms of the BSkyB Contract, BSkyB provides the Old Telewest franchises with 10 BSkyB channels. The former SBCC franchises have, since February 16, 1996, been provided with BSkyB programming pursuant to an industry rate card, which sets out the terms and conditions for the supply of programming by BSkyB to those operators in the U.K. cable industry who do not have separate agreements with BSkyB. BSkyB also offers this programming (together with additional programming) to its DTH satellite customers, in competition with the Company and all other cable operators throughout the U.K. The BSkyB Contract grants to Old Telewest a non-exclusive right and license to receive BSkyB's channels and "pay-per-view" services (which, for the purposes of the BSkyB Contract, will include (when available in the U.K.) NVOD but not video-on-demand) and, subject to available capacity, to distribute the channels to residential, commercial and public premises customers and distribute the "pay-per-view" services to residential customers. The agreement provides for the parties to negotiate in good faith for the provision of "pay-per-view" services for commercial customers, subject to the acquisition of programming for such services. Under the BSkyB Contract, and in respect of the industry rate card for the former SBCC franchise areas, customer fees payable to BSkyB for each customer are different for residential, commercial and public premises customers and vary according to the channels subscribed for and, in the case of commercial customers, according to the number of rooms for which the service is provided. Fee arrangements for "pay-per-view" programs are negotiated separately for each program. The monthly fees for basic channels under the BSkyB Contract and the industry rate card are subject to annual increases which are equal to the greater of 7% or the amount of the annual change in the U.K. Retail Price Index under the contract and the industry rate card. Customer fees for premium channels are linked to BSkyB's DTH satellite subscription prices. Old Telewest has the option to bring the former SBCC franchise areas into the contract subject to 11 14 the satisfaction of certain conditions. The aggregate amount paid by the Company to BSkyB with respect to the year ended December 31, 1996 was (pound)48.9 million. In July 1995, the Office of Fair Trading ("OFT") declared that the BSkyB Contract is registerable under the Restrictive Trade Practices Act of 1976 and that certain of the provisions in the agreement are significantly anti-competitive. As a result, BSkyB has submitted proposals to the OFT amending the relevant provisions, and the Company is willing, in principle, to accept such proposals. The OFT has opined that the proposals address its concerns on the anti-competitive provisions. However, the European Commission has indicated that certain of the remaining provisions may contravene European competition law. If the parties are unable to persuade the European Commission to the contrary, and the parties do not modify the provisions in issue, the European Commission may initiate formal proceedings. If at the end of those formal proceedings the European Commission maintains its original position, it may issue a decision declaring that such provisions infringe European competition law and are therefore void. The Company does not anticipate that any such decision would impose any other sanction. The Company also obtains a significant amount of its programming (11 programming channels) from providers which Flextech plc ("Flextech"), a publicly quoted U.K. company (approximately 50.1% of which is owned by an affiliate of TCI and approximately 7.4% of which is owned by an affiliate of U S WEST), and other affiliates of TCI either own interests in or manage. In addition, affiliates of U S WEST, TCI and SBC are partners in CPP-1, a joint venture with three other U.S. cable operators which has a 10% interest in Live TV. Live TV is carried by the Company's network. Cox also has an interest in The Discovery Channel, The Learning Channel, UK Gold and UK Living, all of which are carried by the Company's network. In March 1997, Cox and Flextech announced an agreement pursuant to which Cox will sell its interest in UK Gold and UK Living in exchange for an interest in Flextech (which will dilute the current interests of the TCI affiliate and U S WEST affiliate). The Company believes that programming obtained from all the affiliated programming suppliers is obtained on terms no less favorable than those available to unrelated third parties. Flextech and BBC Worldwide Limited have agreed to establish two programming joint ventures. The first joint venture will deliver a number of new pay television channels in the U.K. covering themes including documentaries, entertainment, education, culture, sports, music and repeats of popular BBC programming. The second joint venture will further develop UK Gold (following Flextech's acquisition of UK Gold) in an analogue format and, in the future, in a digital format. Each joint venture is expected to have preferential access to a wide range of existing and future BBC programs for an initial term of 15 years and an additional term of 15 years (unless the joint venture companies decide to terminate the arrangement). The Flextech/BBC arrangement is subject to, among other things, approval by the Flextech shareholders and approval by the Department of National Heritage. The Company believes that this programming will be offered to cable operators and will enhance their programming services. 12 15 Advertising In the twelve months ended December 31, 1995 and 1996, the Company's revenue from advertising was approximately (pound)399,000 and (pound)1,326,000, respectively. The Company has allocated one channel on its network for local advertising (typically text and still graphics). In addition, with the programming provided to the Company by a number of suppliers (not including programming supplied by BSkyB or terrestrial broadcasters, which together currently account for the vast majority of television viewing time by cable customers in the U.K.), the Company typically is allocated time (usually one or two minutes per channel per hour) during which the Company can insert advertising. The Company believes that cable television advertising presents an attractive opportunity for both local and national advertisers, and that such advertising will become increasingly popular as cable penetration and viewership increase and potential advertisers become more familiar with cable television. Cable television advertising also provides local merchants with an ability to target local markets that are not available through terrestrial or satellite broadcasting. The Company currently has 58 employees dedicated to the sale of advertising time. In 1996 the Company formed a subsidiary operating under the name "Cable Adnet" which sells advertising for the Company and may in the future sell advertising for the other companies in the cable industry. CABLE TELEPHONY Overview The Company, through its predecessor companies, began offering cable telephony in the U.K. in 1992. The Company derives its cable telephony revenues from connection charges, monthly line rental charges, call charges, residential service charges (e.g., call waiting), business service charges (e.g., private business line and centrex) and interconnection fees payable to the Company by other operators. As at December 31, 1996, the Company had passed and marketed approximately 2,254,734 homes for cable telephony, had 627,009 residential lines for 620,377 customers (representing a residential cable telephony penetration rate of approximately 27.5%) and had installed an aggregate of 67,823 business lines for 20,882 customers. Services The Company seeks to offer residential and business customers reliable and high-quality telephony services over its broadband network at competitive prices. Residential Services. The Company offers local, long distance and international cable telephony service as well as a broad range of additional services to its residential customers. The Company's additional services include: call waiting, call barring (prevents unauthorized outgoing calls), call diversion (call forwarding), three-way calling and fully itemized monthly billing. In addition, the Company is currently introducing voice mail and caller identification throughout its Regional Franchise Areas. The Company's network architecture provides a flexible platform that will enable it to offer a wide range of other telephony services as they become available in the future. 13 16 Business Services. The Company markets its cable telephony services to selected businesses and institutions within its franchise areas. The Company believes that these targeted businesses and institutions represent attractive potential customers because (a) they have a high volume of calls, many of which are high-margin local calls that can be switched and delivered entirely by the Company, (b) the Company generally can serve these needs with its existing technology and network and without investing in costly research and development of new networks and products, (c) the persons making the decisions with respect to selecting telephony service are usually located in the Company's Regional Franchise Areas and (d) by targeting specific segments, the Company directs significant advice and support to a specific, targeted customer base. As of December 31, 1996, the Company served more than 20,882 business customers and had installed 67,823 business lines. The Company offers a range of special business services that it believes are particularly attractive to small- and medium-sized businesses and institutions. For example, the Company provides high-capacity private lines to carry voice and data between two or more locations within a Regional Franchise Area (e.g., between two branch offices) and will provide high-capacity private lines to connect voice and data between locations in different Regional Franchise Areas and other areas of the U.K. when the Interfranchise Network becomes operational starting by the end of 1997. See "New Initiatives -- The Interfranchise Network". In addition, the Company offers a "CENTREX" service, which provides the switching of internal and outside calls for multi-line businesses from outside the customer's premises, thus saving the customer the cost of purchasing or leasing its own switching equipment. In 1996, the Company introduced the "Call Manager" service which provides smaller customers with switching capability similar to that provided by "CENTREX". The Company currently also offers ISDN service to its business customers in two of its Regional Franchise Areas, which permits the high speed, simultaneous transmission of voice, data and video over the telephone line. The Company currently anticipates rolling-out the ISDN service over time to the other Regional Franchise Areas. See "On-Line Service -- Internet Access." With the introduction of "number portability" in the UK in September 1996, the Company began offering BT and Mercury customers (residential and business) the opportunity to transfer their service to the Company without changing their existing telephone number. As of March 1, 1997, the Company had implemented number portability in four of the seven Regional Franchise Areas and to date customer interest has been strong, with 32,813 lines being transferred to the Company during the period of September 1, 1996 through February 28, 1997 and no requests for line transfers from the Company during the same period. ON LINE SERVICES Internet Access In 1996, the Company began offering customers Internet access through its own Internet service provider, Cable Internet Limited. This access had been extended to five of the seven Regional Franchise Areas by the end of 1996. The Company currently provides three Internet access services: dial-up services primarily for residential customers, leased lines for business 14 17 customers and network access for wholesale customers. The Company also intends to offer higher speed Internet access to business customers using ISDN lines. The Company has completed a technical trial of high speed Internet access using cable modems and intends to begin rolling this product out to several Regional Franchise Areas in 1997, subject to consumer demand. This service provides high speed Internet access via a computer over the Company's broadband network, rather than over the telephone lines (thereby eliminating telephone call charges and providing access at more than 100 times the speed otherwise available over the telephone). In addition, the Company plans to offer customers cable television Internet access as part of the digital services to be rolled-out by the end of 1997. This service will enable customers to access the Internet over the Company's broadband network at higher speeds than otherwise available over the telephone line utilising the customer's television set as a screen and controlling the service by using either an infra-red remote control or a more sophisticated alpha-numeric remote keyboard. See " New Initiatives -- Digital Service." The "Sega Channel" In May 1996, the Company launched the "Sega Channel", a cable-exclusive service that delivers video games on demand, 24 hours a day, direct to the customer's house. The "Sega Channel" provides up to 50 titles per month, including preview versions of soon-to-be-released titles, game play tips, news, contests and promotions. The Company charges an additional fee of (pound)9.95 per month for "Sega Channel" service. The "Sega Channel" currently is offered in three of the Owned and Operated Franchises and the Company currently has more than 2000 subscribers to the channel. NEW INITIATIVES The Company recently launched two major initiatives intended to enable the Company to provide its customers with a wider range of attractive programming and service offerings and increased value for money. These initiatives are the introduction of digital services and the construction of the Interfranchise Network. Digital Service The Company intends to introduce digital technology in the U.K. by the end of 1997 and thereby substantially increase utilization of the capacity of the Company's broadband network and enable the Company to significantly expand its services. Digital technology allows operators to provide more channels (through digital compression of analogue signals), and higher quality pictures and sounds. Through the introduction of digital technology, the Company expects to be able to offer customers up to 240 programming channels (as compared to the 52 channels currently offered by the Company through its analogue service), which will enable the Company to provide services such as NVOD and pay-for-view. It will also enable the Company to use its broadband network to provide additional services such as cable television Internet access, electronic mail and home shopping and banking. See "On Line Service -- Internet Access". The Company believes that digital technology will enable it to offer customers substantial additional choice and flexibility in selecting the services desired. 15 18 The Company recently appointed General Instruments Corporation ("General Instruments") to provide a turnkey digital service for the Company, which includes designing, manufacturing and supplying the digital set-top boxes required to receive digital services, as well as manufacturing and installing the digital head-end and associated electronics and software. The Company's digital head-end is being built at its Knowsley franchise, where the programming and services will be received by satellite, terrestrial broadcast or videotape and converted into a digital signal for transmission over the Company's broadband franchise networks and into customer homes and businesses. Construction of the Interfranchise Network will enable the Company to use a single digital head-end to transmit the digital signal to remote units in each of the Company's franchises, thereby avoiding the need to install a separate digital head-end in each franchise and maintain personnel at each such head-end. See "The Interfranchise Network." The Company intends to continue to offer customers analogue services, as it rolls out the digital services. Customers who subscribe for digital services will do so by using either an infra-red remote control or a more sophisticated alpha-numeric remote keyboard. Customers will be able to rent or purchase the digital set-top box from the Company and the Company currently anticipates that most digital customers will choose to rent (rather than purchase) the converter boxes. The Company intends to purchase set-top boxes from General Instruments as needed to meet customer demand for digital services. The Interfranchise Network In 1996 the Company commenced construction of the Interfranchise Network, which will link the 26 Owned and Operated Franchises and the seven Affiliated Franchises. The Interfranchise Network is scheduled to be 75% complete by the end of 1997 (and operational between the portions then completed) and 100% complete by the middle of 1998. The Company anticipates that construction of the Interfranchise Network will increase telephony margins by reducing the payment of interconnection fees to national carriers for long distance calls between locations in different franchise areas. The Company expects that construction of the Interfranchise Network also will create new business telephony revenue opportunities by enabling the Company to create private networks for businesses with multiple sites located throughout the various Company and Affiliate Company franchise areas. In addition, the Company's new national telecommunications will also permit the Company to link sites of its business customers located outside of the franchise areas to such private networks by running its own lines from the Interfranchise Network to such out of franchise sites or linking them to the Interfranchise Network via an interconnection with another carrier. The Interfranchise Network will also provide a more cost-effective, centralized method of delivering digital services to all of its franchise areas by enabling the Company to use a single digital head-end connected to remote units in each franchise rather than separate digital head-ends (each with its own staff) in each franchise. 16 19 When complete, the Interfranchise Network is expected to include approximately 2,250km of high capacity multi-fibre optic cable, as well as various high capacity electronics. The Company is seeking to build the network in a cost effective manner, using a combination of parts of the existing networks of the Company and the Affiliated Companies, parts newly built by the Company or built and shared with other service providers and parts consisting of leased lines (with electronics in place) and leased fibre (without electronics in place). PRICING The Company historically has charged separately for its cable telephony and cable TV services (although the former SBCC franchises have offered certain package offerings). In 1996, the Company began offering combined pricing packages under the brand name Teleplus. More than 32% of the Company's customers as of December 31, 1996 were receiving services under a Teleplus pricing package. Cable TV The Company currently charges either (pound)14.99 (if the customer elects the direct debit payment option) or (pound)15.99 per month for its standard basic cable television service (generally 52 channels and one converter box which provides cable service to one television). Premium channels range in price from (pound)5.99 per month per channel to (pound)19.99 per month per channel, depending on the channels selected. Customers receive discounts for the purchase of multiple premium channels. An additional monthly fee of (pound)4.49 is charged for each additional converter box. All converter boxes remain the property of the Company and a refundable (pound)20.00 deposit may be charged for each box. Typically, the Company charges a one-time cable television connection fee of (pound)30.00, although the Company often offers reduced or no connection charges for cable television when service is first provided in an area or an area is remarketed. All prices indicated above include U.K. value added tax ("VAT"). Cable Telephony The Company currently seeks to provide its telephony customers with savings on the cost of calls as compared to BT, its principal competitor. The Company intends to maintain such savings, although there can be no assurance that the Company will be able to continue to provide its residential customers with lower call prices than BT without adverse effects on its profitability, particularly in light of continued regulatory downward pressure on BT's charges. See "Certain Regulatory Matters -- Cable Telephony -- Price Regulation". For residential telephony customers, the Company offers a three-tier price structure for line charges (which is in addition to the call charges discussed above). The monthly charge for customers subscribing for the telephony service only is (pound)7.56 per line, providing a saving of (pound)1.00 per month over BT's equivalent charge. The monthly charges for special services such as call waiting or call diversion vary between (pound)1.00 and (pound)2.00 per service. Initial installation charges are (pound)30.00 as compared to BT's equivalent charge of (pound)116.33. However, because most telephony customers already have an existing BT line, the Company's installation fees are often discounted to encourage customers to switch service providers. 17 20 The Company's line charges for business customers (which are in addition to the call charges discussed above) also are competitive with those of BT and Mercury Communications Limited ("Mercury") and other suppliers. The Company's monthly line rental charge for a business customer as at December 31, 1996 was (pound)9.93 and its line installation charge varied according to the number of lines installed (from (pound)50 for the first line to (pound)30 for each subsequent line). All prices indicated above exclude VAT. Like BT and Mercury, the Company and other cable telephony operators may require residential customers to pay a security deposit prior to the commencement of telephony service, providing such customers with an unlimited amount of credit. In certain Regional Franchise Areas, the Company has begun to offer its customers a service which provides certain customers a limited amount of credit for telephony service without the payment of a deposit. This enables more customers to subscribe for the Company's telephony service, while limiting the Company's exposure to bad debts. As a consequence of owning its own switching equipment (as discussed below), the Company can provide more pricing and feature options to its customers. For example, the Company currently offers business telephony customers various discount plans based on usage and other factors. Teleplus Package Pricing In order to encourage customers to subscribe for both television and telephony service, the Company offers five Teleplus pricing packages for customers subscribing to both services which vary between (pound)19.99 and (pound)42.99 per month, depending on the Teleplus package chosen. The Teleplus packages provides different combinations of basic telephony and television service together with premium channels and free local calls to other customers within the Company's Regional Franchise Areas. In addition, the installation charge for customers subscribing for both cable television and telephony services at the same time is (pound)30.00. Customer benefits from the Teleplus packages include value pricing as well as the convenience of dealing with a single provider for two services. The Company believes that Teleplus programs provide it with an effective way to cross-promote its services and retain customers. To date the churn rate for customers subscribing under the Teleplus program has been lower than for those subscribing for cable television service only. SALES AND MARKETING The Vice President of Residential Marketing leads the Company's residential sales and marketing activities with a staff of sales and marketing representatives in the field and in the corporate offices handling programming contracts, advertising, promotion and related matters. In addition, there is a Director of Residential Sales and Marketing at each Regional Franchise Area who directs the sales and marketing for that area. A Vice President of Business Services leads the Company's business service operations, sales and marketing activities and is supported by Directors of Business Services in the Regional Franchise Areas. The corporate marketing staff and the field marketing directors and their staff meet on a frequent basis to review sales and marketing results at each of the franchises and to exchange ideas with respect to various sales 18 21 and marketing practices. From time to time, the Company also discusses sales and marketing practices with the Affiliated Companies. The Company generally markets its residential cable television and cable telephony services together. This joint marketing approach provides the Company with significant cost advantages over service providers that offer only television or telephony services and therefore cannot spread the marketing costs over multiple services. The Company believes that such integration of services offers important advantages to both the customer and the Company. For the customer, it provides additional value and the convenience of a single service provider for a variety of services. For the Company, it helps increase customer spending and loyalty. In 1997, the Company expects to expand the packaged offerings to include options for dedicated lines for Internet access. The Company also intends to continue to market its services separately to attract single interest customers who may later be progressively upgraded if they so choose. In July 1996, the Company launched "Telewest Communications" as the brand name for all of the Regional Franchise Areas, linking operations which had historically developed under several different names. This integration was a comprehensive project, involving the harmonization of operations from signs and uniforms to communications and marketing literature. Through national branding, the Company is able to reduce advertising costs and increase brand awareness. As the network becomes further built out, the Company is focusing less on door-to-door sales and more on integrated marketing strategies, which combine direct sales, telemarketing, direct mail and retail. As part of this approach, four campaigns were conducted during the year, spreading awareness of "Telewest Communications" throughout the franchise areas. In communities where the network is most built out, these integrated strategies are designed to emphasize the Company's core strengths of value, choice and service. Due to the specialized nature of the Company's business telephony products and the competitive nature of the market, the Company has separate sales and marketing groups to market, service and support business customers. To maximize the productivity of its sales staff, the Company pays field representatives on either a salary plus commission or a straight commission basis. The commissions generally are based on various factors, including penetration level and revenue from services sold. In order to minimize customer churn, a portion of the commission may be withheld until a customer retains service for a given period (typically four months). CUSTOMER SERVICE Customer service is primarily handled locally by each of the Regional Franchise Areas and a Vice President of Customer Services coordinates customer services operations among the Regional Franchise Areas. Approximately 730 customer service representatives in the Regional Franchise Area offices report to the Managing Director and Director of Customer Operations at each of the Regional Franchise Areas. 19 22 The Company has introduced an eight week customer care training course for telephone based customer service representatives. This program is now being expanded for all sales staff, installers and repair technicians. The customer service department is organized so that customers need call only one number to reach the appropriate service provider to address their cable television and cable telephone service, billing and repair questions. The Company seeks to provide customers with prompt telephony and television service repair. Generally, repair service is done by the Company's own employees and service installations and terminations are done by a combination of its own employees and independent contractors. One important measure of customer satisfaction is the service churn rate among customers. A customer may terminate service by prior written notice to the Company. The Company may terminate a customer's service when the customer becomes delinquent in payment. The Company's experience to date is that the churn rate is highest shortly after a customer first activates a service. The Company reduced churn rates for basic cable television service from 41.0% in 1995 to 33.4% in 1996 and for residential telephony line service from 21.8% in 1995 to 19.6% in 1996. The Company believes the reduced churn rates for basic cable television service and residential telephony line service resulted in part from the introduction of Teleplus package pricing and the decreased emphasis placed by the Company on heavily discounted promotional offers, which traditionally have resulted in high churn rates as the Company and the U.K. cable industry have matured. The churn rates for business telephony line service increased from 12.4% in 1995 to 14.5% in 1996 primarily due to the Company's efforts to market its service to a broader range of business customers. Prior to 1996, the calculation of churn included those customers who moved homes and reconnected elsewhere in one of the Owned and Operated or Affiliated Franchises and consequently overstated customer dissatisfaction with the service provided. In 1996, the Company revised the basis on which "churn" is calculated (consistent with industry practice) to exclude those customers who moved their cable service from one premises to another within one of the Owned and Operated. Average churn rate for 1996 represents (i) the total number of customers who voluntarily or involuntarily terminated service during such period, divided by (ii) the average number of customers in such period. The Company seeks to minimize customer churn by providing customers with a combination of attractive, competitively-priced programming and telephone services and strong customer service. The Company regularly surveys its customers to determine their satisfaction with the service provided and attempts to improve such service based on the explanations offered by customers who cancel their service. In order to reduce terminations by customers and improve debt collection, the Company encourages customers to pay bills by direct debit by offering lower prices to customers who pay with direct debit. Through Teleplus package plans, the Company encourages customers to subscribe for both cable television and cable telephony services because it believes that customers with both services are less likely to terminate service than those who subscribe for cable television only. See "Pricing". 20 23 NETWORKS Construction Broadband Network. The Company expects that the broadband cable network in the Owned and Operated Franchises will cover approximately 41,000 kilometers and pass approximately 3.9 million homes when substantially completed. As at December 31, 1996, the Company had completed construction of the network passing approximately 65% of the homes in the Owned and Operated Franchises. The Company anticipates that the remaining construction will be substantially completed by the end of 2000. Construction of the broadband cable network has commenced at all of the 26 Owned and Operated Franchises. The Company plans the construction in the Owned and Operated Franchises based on various factors, including construction milestone requirements (as discussed below), network design considerations (e.g., location of head-end), franchise demographics and facilitation of interconnection with other the Owned and Operated Franchises. The Company plans construction of each Owned and Operated Franchise so that it is able to activate service to customers in stages as the franchise is developed and thereby benefit from subscriber revenues prior to the completion of construction of the entire franchise. The Company generally does not incur the cost of bringing the cable from the curbside duct to the home unless and until a customer elects to subscribe for service. Each Telecommunications License (as defined in "Certain Regulatory Matters") prescribes build obligations ("milestones") that require the Company to construct its network to pass a specified number of premises (which are defined for the purposes of the Telecommunications Licenses as homes or businesses passed for cable television service) by prescribed dates. Although in the past the Company from time to time has not met certain milestones, it has generally sought and received appropriate milestone modifications from the Director General of OFTEL. The following table sets out the aggregate future milestones for each of the Company's seven Regional Franchise Areas. The actual milestones that the Company is required to meet are specified individually for each of the franchises within the Regional Franchise Areas. Consequently, the Company could meet the aggregate milestones for a given Regional Franchise Area, but still fail to meet one or more individual franchise milestones and therefore subject a Telecommunications License to the risk of revocation or termination.
LONDON NORTH SOUTH AVON AND NORTH AS OF SOUTH SCOTLAND EAST EAST COTSWOLDS WEST MIDLANDS TOTAL DECEMBER 31,(1) MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE ------------------------- --------- --------- --------- --------- --------- --------- --------- 1997 379,000 537,500 237,000 285,000 440,000 670,000 490,000 3,038,500 1998 379,000 549,000 294,000 379,000 445,000 715,000 614,000 3,375,000 1999 379,000 549,000 340,000 424,000 445,000 760,000 614,000 3,511,000 2000 379,000 549,000 340,000 424,000 445,000 792,000 614,000 3,543,000 (1) All milestone information is rounded to the nearest thousand.
21 24 The aggregate annual build requirements for the Company in order to meet the milestones is to pass an additional 414,681, 65,000, 120,000 and 120,000 premises in 1997, 1998, 1999 and 2000, respectively. The Company has initiated discussions with OFTEL regarding the modification of future milestone obligations and a retrospective modification in respect of a failure to meet certain of its 1996 milestone obligations. The Company believes that in view of the substantial portion of its networks constructed to date, its record of meeting milestones to date and its plans for substantial investment in the Interfranchise Network and digital technology, the Company will be able to obtain the necessary modifications to its milestone obligations, although there can be no assurance it will be successful in so doing. The following table sets out the aggregate future milestones for each of the three Affiliated Companies. The actual milestones that the Affiliated Companies are required to meet are specified individually for each of the seven franchises within the Affiliated Franchises. Consequently, the Affiliated Companies could meet the aggregate milestones for a given Affiliated Franchise, but still fail to meet one or more individual franchise milestones and therefore subject a Telecommunications License to the risk of revocation or termination.
CABLE CABLE MILESTONE BIRMINGHAM LONDON CORPORATION DATE MILESTONE(1) MILESTONE(1)(2) MILESTONE(1) ---- ------------ --------------- ------------ December 31, 1997 275,000 257,000 264,000 December 31, 1998 325,000 287,000 264,000 January 31, 1999 400,000 409,000 264,000 December 31, 1999 450,000 _______________ (1) The milestones for the Affiliated Companies are specified in the Telecommunications Licenses for 12-month periods ending on the last day of various months. All milestones are presented on an annualized pro forma basis for 12-month periods ending on December 31. All milestone information is rounded to the nearest thousand. (2) Revised milestones in respect of certain Cable London franchises have been approved by OFTEL, but are subject to formal amendment.
Interfranchise Network. For information regarding the Company's interfranchise network, see "New Initiatives -- The Interfranchise Network". Network Architecture In the U.K., cable operators generally are required to install cable underground. This significantly increases the cost of construction as compared with above-ground installations and makes it more time-consuming, costly and disruptive to customers and others for the Company to replace cable or underground components in the cable network in order to upgrade and expand service in the future. As a result, the Company designs its distribution network (e.g., the 22 25 fibre-optic cable and underground components) to permit network upgrades and expansions to be accomplished whenever possible by installing or replacing equipment at the head-end and/or the customers' premises and without undertaking significant construction with respect to its existing underground network and incurring substantial additional construction costs. The Company is currently upgrading the network to carry digital services and is doing so almost entirely through the addition of equipment at the head-ends and at customer premises and without the need for significant network construction costs. The network architecture of the Company's individual franchises varies generally depending on when the construction was started. Initially, cable systems in the U.K. were built to provide only cable television service. Following the review undertaken by the U.K. government (when the U.K. government changed the duopoly policy to permit cable operators to operate their networks to provide cable telephony services and call switching as principals, rather than only as agents for and under agreements with BT or Mercury (the "Duopoly Review")) telephony service was often added to existing networks and plans for future networks were modified to carry both television and telephony services. In some business areas the Company has built cable telephony only networks. As a result, there are three types of networks in use or under construction by the Company: cable television only; cable telephony only; and cable television with a cable telephony overlay. Currently, cable television only service is provided to residential customers in part of the Scotland Regional Franchise Area franchise. The overlay network is used in all of the Company's other franchises under construction or previously installed and is being used to upgrade the parts of the Scotland Regional Franchise Area that currently provides only cable television service. In some predominantly commercial areas in the Company's franchises, only cable telephony services are provided. Switching Digital telephony switches have been installed in all of the Company's Regional Franchise Areas. The switches enable the Company to increase its profitability and operating flexibility by (a) eliminating the need to pay third parties for switching calls between its customers within a Regional Franchise Area and reducing the cost of switching calls to other operators outside of a Regional Franchise Area, (b) receiving revenues from other telephony operators who use the Company's switches to complete calls to the Company's customers and (c) eliminating the need to rely upon third parties for the administration of new customer connections. In addition to the installation of its own switches, the Company (together with certain other cable operators) has established a central network service center in Woking that provides 24-hour-a-day centralized switch engineering, interconnect access administration and related support services. The costs of the service center are shared by the participating cable operators. The Company believes that this centralized system is a cost-effective approach to managing cable telephony networks with multiple switches. By operating its own switches, the Company is able to gather information about customer calling patterns and use this information in its marketing program and to structure customized 23 26 call pricing plans and discount programs. The availability of this information also enables the Company to reduce fraudulent activity by identifying unusual or excessive call activity at an early stage. As part of the Company's strategy of increasing the volume of calls switched locally and minimizing interconnect charges payable to national and regional public telephone operators ("PTOs"), the London Interconnect consortium (of which the Company is a member) has created an inter-franchise telephony network that covers the member franchise areas. In addition, the Company is developing a broadband Interfranchise Network to carry voice, data and video traffic between the franchises which is expected to be completed in mid-1998. See "Business -- New Initiatives -- Interfranchise Network." In December 1996, the Company was awarded an international facilities license under the Telecommunications Act 1984 by the Secretary of State for Trade and Industry. This will enable the Company to establish direct relationships with international PTOs and further reduce the cost of international carriage. In December 1996, the Company began connecting its Regional Franchise Areas to Telstra (the Australian PTO) to carry a portion of the Company's international telephony traffic. See "Certain Regulatory Matters - -- Interconnection Arrangements." Sources of Supply The Company obtains services and equipment for the construction and operation of its cable systems from numerous independent suppliers. These services, including civil engineering services, and equipment generally have been purchased under short-term contracts (e.g., one year or less), although the contracts for the Company's interconnect services are longer. As a result of its increased operational size and purchasing needs, the Company seeks to use its increased buying power to obtain more favorable contract terms covering longer periods (e.g., one to three years). The Company believes that it can purchase all of the services and equipment it needs to operate its business from more than one source. However, if one of the suppliers of a product which involves significant lead time for production and delivery were to be unwilling or unable to supply the Company, the Company could suffer disruptions in the operation of its business, which could have an adverse effect on the Company. The Company's principal suppliers include the following: McNicholas Construction Company Limited, M&N Contractors Limited, AMEC Utilities Limited, Moywest Limited, Ashbourne Communications U.K. Ltd, JP Fitzpatrick, J Murphy and Sons Limited, Kelly Communications (civils and activations contractors); Nortel Ltd and GPT Telecommunication U.K. Limited (telephony switching equipment); General Instruments Inc. and Scientific-Atlanta Broadbank Europe Inc. (addressable converter boxes); Antec International and Tratec U.K. Ltd (cable TV distribution equipment); Nokia Telecommunications and DSC Technics Limited (telephony transmission equipment); Times Fiber Communications Inc. and Commscope (coaxial cable); GPT Telephone Cables (fibre-optic and copper cable); Eltek Limited and Alpha Technologies (power supply equipment). 24 27 The Company owns all of its cable network equipment other than its Nortel switches. The Company leases these telephony switches under finance leases from Nortel and the Royal Bank of Scotland. The Company intends to contract with General Instruments to provide digital set-top converter boxes. See "New Initiatives -- Digital Services". The Company has experienced no significant difficulty in obtaining timely deliveries of services and equipment within the past 12 months and believes it maintains adequate inventories of significant equipment. In order to reduce warehousing expenses, maximize inventory control and minimize the possibility that the Company will not have the required inventory to proceed with construction in a timely manner, the Company has centralized warehouse operations through a third-party supplier of warehousing services. FRANCHISES Regional Franchise Areas The Company owns 26 cable franchises in the U.K. and holds licenses to provide cable television and cable telephony services within each of its franchise areas. The Company's 26 franchises are managed in seven Regional Franchise Areas: London South, Scotland, North East, South East, Avon and Cotswolds, North West and Midlands. The franchises within each Regional Franchise Area are clustered together, which provides the Company with several benefits, including (a) providing substantial economies of scale in the construction and marketing of the cable network and the management of the franchises, (b) enabling the Company to provide local switching services for a large number of customers without incurring the high costs of connecting geographically dispersed areas, (c) providing a regional market for advertisers that generally is not available through broadcast or satellite media and (d) enabling the Company to offer local programming on a more cost-effective basis. On April 1, 1996, the Company purchased the remaining 4% equity interest in the Cotswolds Regional Franchise Area (representing 4,223 equity homes and 367 equity businesses) and the remaining 9.9% equity interest in the South East Regional Franchise Area (representing 48,821 equity homes and 3,530 equity businesses), each owned by Trans-Global Guernsey Limited ("Trans-Global"), for an aggregate consideration of 7,047,483 Ordinary Shares. As a result, each of the Owned and Operated Franchises is now wholly owned by the Company (other than a 0.07% minority interest held by a third party in the London South Regional Franchise Area (the statistical and other information contained in this document have not been adjusted to reflect this minority interest). 25 28 The following table sets forth certain data concerning the Company's Regional Franchise Areas at and for the twelve-month period ended December 31, 1996:
(NOTE: (L)=BRITISH POUND) LONDON NORTH SOUTH AVON AND NORTH SOUTH SCOTLAND EAST EAST COTSWOLDS WEST MIDLANDS TOTAL ----- -------- ---- ---- --------- ---- -------- ----- Franchise homes......... 420,703 631,461 354,098 493,140 511,215 828,694 634,839 3,874,150 Franchise businesses.... 29,706 28,584 14,450 35,690 42,891 61,612 47,581 260,514 CABLE TELEVISION Homes passed............ 378,075 493,621 173,395 182,853 362,495 561,580 423,123 2,575,142 Homes passed and 360,091 447,316 162,559 162,499 327,998 505,695 369,795 2,335,953 marketed ........... Basic customers......... 82,827 97,250 32,518 44,634 70,606 116,466 83,841 528,142 Penetration rate (1).... 23.0% 21.7% 20.0% 27.5% 21.5% 23.0% 22.7% 22.6% Additional Outlets...... 33,891 59,788 20,064 24,927 35,192 22,520 18,179 214,561 Average monthly revenue per customer (1)........ (L)25.27 (L)24.95 (L)23.27 (L)23.67 (L)22.62 (L)20.84 (L)20.80 (L)22.95 Average churn rate (1).. 33.1% 36.6% 32.9% 29.1% 31.9% 32.5% 34.5% 33.4% RESIDENTIAL TELEPHONY Homes passed............ 361,801 388,193 170,112 182,853 359,792 537,654 396,253 2,396,658 Homes passed and marketed 336,270 394,201 159,398 162,499 328,116 504,455 369,795 2,254,734 Residential customers (2) 61,151 98,735 48,650 48,654 89,900 153,152 120,135 620,377 Penetration rate (1).... 18.2% 25.0% 30.5% 29.9% 27.4% 30.4% 32.5% 27.5% Residential lines connected............... 63,443 101,069 48,653 48,769 91,437 153,152 120,486 627,009 Average monthly revenue per line (1)............ (L)26.50 (L)20.44 (L)17.93 (L)21.11 (L)20.34( (L)19.67 (L)17.89 (L)20.26 Average churn rate per line (1).......... 21.6% 18.8% 16.4% 19.0% 16.2% (8)24.1% 17.4% 19.6% BUSINESS TELEPHONY Business customers...... 4,054 3,024 1,271 974 4,139 5,041 2,379 20,882 Business lines connected 18,543 8,164 2,627 3,443 13,843 12,324 8,879 67,823 Average number of business lines per customer (1) 4.6 2.7 2.1 3.5 3.3 2.4 3.7 3.2 Average monthly revenue per line (1)............ (L)64.82 (L)53.19 (L)51.51 (L)71.97 (L)44.51 (L)50.86 (L)46.66 (L)54.50 Average churn rate per line (1).......... 12.2% 18.4% 12.3% 28.1% 13.1% 17.9% 9.2% 14.5% - ---------------------------- Notes: (1) For the definitions of these terms, see the footnotes to the table on page 4. (2) The information set forth under "Residential Customers" represents the number of residential lines connected, which is greater than the actual number of residential customers.
Description of Regional Franchise Areas The following is a brief description of each of the Company's Regional Franchise Areas: London South. The London South Regional Franchise Area (the "London South Area") covers approximately 360 square kilometers and includes three franchise areas (Croydon, Sutton and Merton, and Kingston and Richmond). The London South Area has approximately 421,000 homes and approximately 30,000 businesses. The London South Regional Franchise Area includes a suburban section of Greater London as well as the large business center of Croydon. The Croydon franchise was awarded in 1983 and is the oldest one owned by the Company. Construction of the Croydon network began in 1985. Much of the Croydon network was constructed before cable telephony generally was offered by cable operators in the U.K. However, the Company has provided cable telephony service to business customers in the Croydon business center over its telephony-only network since 1991 and recently began offering telephony service to its residential customers in Croydon. 26 29 Construction in Croydon for cable television was substantially completed in 1990 and construction for telephony was completed in 1996. Construction in the Sutton and Merton franchise began in 1990 and in the Kingston and Richmond franchise in 1991 and are now both complete. Avon and Cotswolds. The Avon and Cotswolds Regional Franchise Area (the "Southwest Area") covers approximately 2,120 square kilometers and includes Bath, Bristol, Cheltenham, Gloucester, Frome, Warminster and Weston-super-Mare. The Avon and Cotswolds area has approximately 511,000 homes and approximately 43,000 businesses. Construction in the Cotswolds area began in July 1994 and is ongoing. The Company granted to Trans-Global a carried interest in respect of the Avon, South East and Cotswolds Areas in connection with the Company's acquisition of those Regional Franchise Areas in consideration for services provided by Trans-Global to the Company in connection with such acquisitions. The carried interest entitles Trans-Global to certain payments in respect of each such Regional Franchise Areas either (a) within 60 days after the fifth anniversary of the date when 50% of the homes within a given Regional Franchise Area are passed or (b) at Trans-Global's option, at any time prior to such date upon 60 days' notice. The carried interest payments will equal 0.75% of the product of ten times the annual operating income of such Regional Franchise Areas (subject to certain adjustments), after deducting outstanding debt and equity financing and interest and adding an amount equal to the working capital of such Regional Franchise Areas (or subtracting an amount equal to their working capital deficit). The Company does not expect any such payments to have a material impact on the liquidity or capital resources of the Company. Construction in the Avon Area began in 1990 and is ongoing. Scotland. The Scotland Regional Franchise Area (the "Scotland Area") covers approximately 3,000 square kilometers and includes eight franchise areas (Edinburgh, the second largest financial center in the U.K., as well as Cumbenauld and Monklands, Dumbarton, Dundee, Falkirk and Livingston, Glenrothes and Kirkcaldy, Motherwell and Perth) in the southern region of Scotland. The Scotland Area covers approximately 631,000 homes and approximately 29,000 businesses. Construction in the Edinburgh franchise began in March 1992 and construction of the broadband networks in all the other franchises in the Scotland Area was begun in 1990 by the prior owner of such franchises and is ongoing by the Company. North East. The North East Regional Franchise Area (the "North East Area") covers approximately 640 square kilometers and includes Gateshead, Newcastle upon Tyne, North Tyneside and South Tyneside. The North East Area has approximately 354,000 homes and approximately 14,000 businesses. Construction in the North East Area was commenced by the previous owner in 1990 but was halted by that owner in 1991. Construction was restarted by the Company in May 1993 and is ongoing. South East. The South East Regional Franchise Area (the "South East Area") covers approximately 1,600 square kilometers and includes two franchise areas (North Thames Estuary and South Thames Estuary) covering the areas of Basildon, Chelmsford, Gravesend and 27 30 Maidstone. The South East Area has approximately 493,000 homes and approximately 36,000 businesses. Construction in the South East Area began in February 1994 and is ongoing. North West. The North West Regional Franchise Area (the "North West Area") includes the areas of St. Helens and Knowsley, Wigan, Preston, Southport, North and South Liverpool and Blackpool. The North West Area includes approximately 829,000 homes and approximately 62,000 businesses. Construction in the North West Area began in 1990 and is ongoing. Midlands. The Midlands Regional Franchise Area (the "Midlands Area") includes the areas of Telford, Dudley, Wolverhampton, Worcester, Walsall and Kidderminster. The Midlands Area includes approximately 635,000 homes and approximately 48,000 . Construction for cable television service began in 1991. In 1993, a retrofit program was undertaken to make both cable television and cable telephony services available to all homes previously passed in the Midlands Area and, since then, all new construction provides both cable television and cable telephony services. This retrofit program was completed by the end of 1994, and all homes passed in the Midlands Area are capable of receiving both television and telephony services. Construction of the Telford franchise was completed in 1994 and construction of the Dudley, Wolverhampton, Walsall and Kidderminster franchise is ongoing. Management of Regional Franchise Areas The Company manages its Regional Franchise Areas from its corporate headquarters in Woking, Surrey, England. The Company provides a number of services on a centralized basis, including finance, legal, management information services, network design (including switching, centralized planning and engineering), network service center operations, purchasing of programming and negotiation and administration of procurement and construction contracts. Most other matters are handled by the management of the Regional Franchise Areas under the direction of their Managing Directors. Although marketing programs, pricing and programming generally are standardized throughout the Company, the management of each Regional Franchise Area may modify them in order to reflect local factors. AFFILIATED COMPANIES The Company owns minority equity interests in three Affiliated Companies: Birmingham Cable, Cable London and Cable Corporation. The Affiliated Companies own an aggregate of seven cable franchises in the U.K. As of December 31, 1996, the aggregate amount invested by the Company in the Affiliated Companies was approximately (pound)115 million. Of the Company's 4.3 million equity homes, approximately 401,234 represent the Company's equity interest in the approximately 1.2 million homes owned and operated by the Affiliated Companies. These investments have enabled the Company to grow by acquiring interests in a number of franchises and homes. The Company believes that it benefits by the regular exchange of information with the Affiliated Companies. Although the Company has certain shareholder rights discussed below 28 31 and a representative on the board of directors of each of the Affiliated Companies, the Company does not control the day-to-day management operations of the Affiliated Companies. The following table sets out, unless otherwise indicated, as at and for the year ended for December 31, 1996, certain information concerning the Affiliated Companies:
BIRMINGHAM CABLE LONDON CABLE CORPORATION ------------------------ ---------------------- ------------------------ COMPANY'S COMPANY'S COMPANY'S EQUITY EQUITY EQUITY TOTAL INTEREST TOTAL INTEREST TOTAL INTEREST (100%) (27.5%) (100%) (50.0%) (100%) (16.5%) -------- ----------- ------- ----------- ------- --------- FRANCHISE HOMES.............. 471,094 129,551 444,978 222,044 293,720 48,464 FRANCHISE BUSINESSES......... 31,200 8,580 35,000 17,465 17,500 2,888 CABLE TELEVISION Homes passed................. 383,592 105,488 341,508 170,412 248,348 40,977 Homes passed and marketed.... 378,653 104,130 296,416 147,912 231,726 38,235 Basic customers.............. 111,645 30,702 67,477 33,671 42,928 7,083 Penetration rate (1)......... 29.5% 29.5% 22.8% 22.8% 18.5% 18.5% Additional Outlets........... 33,796 9,294 24,334 12,134 8,669 1,430 Average monthly revenue per customer (1)............... (pound)18.03 (pound)18.03 (pound)22.14 (pound)22.14 (pound)22.07 (pound)22.07 Average churn rate (1)....... 26.8% 26.8% 30.6% 30.6% 30.4% 30.4% RESIDENTIAL TELEPHONY Homes passed................. 374,451 102,974 312,050 155,713 247,976 40,916 Homes passed and marketed.... 369,512 101,616 296,416 147,912 231,354 38,173 Residential customers........ 105,128 28,910 57,495 28,690 49,234 8,124 Penetration rate (1)......... 28.5% 28.5% 19.4% 19.4% 21.3% 21.3% Residential lines connected.. 105,128 28,910 59,074 29,478 49,234 8,124 Average monthly revenue per line (1)................... (pound)22.34 (pound)22.34 (pound)26.43 (pound)26.43 (pound)30.06 (pound)30.06 Average churn rate per line (1)............... 24.9% 24.9% 27.0% 27.0% 24.6% 24.6% BUSINESS TELEPHONY Business customers........... 2,994 823 2,560 1,277 1,912 315 Business lines connected..... 11,302 3,108 9,259 4,620 18,290 3,018 Average monthly revenue per line (1)................... (pound)62.89 (pound)62.89 (pound)67.57 (pound)67.57 (pound)87.79 (pound)87.79 Average churn rate per line (1)............... 32.4% 32.4% 23.0% 23.0% 20.0% 20.0% _______________ (1) For the definitions of the terms, see the footnotes to the table on page 4.
Description of Affiliated Companies The following is a brief description of each of the Affiliated Companies, including a description of the terms of the Company's investments therein. Birmingham Cable. Birmingham Cable covers approximately 400 square kilometers and operates in Birmingham and Solihull. Birmingham Cable has approximately 471,000 franchise homes and approximately 31,200 businesses (representing approximately 130,000 29 32 equity homes and approximately 8,600 equity businesses based on the Company's current share ownership of Birmingham Cable). The Birmingham cable franchise is one of the largest in the U.K. in terms of the number of franchise homes. Telewest Communications (Holdings) Limited ("TWH") (a wholly owned subsidiary of the Company) and Comcast U.K. Cable Partners Limited ("Comcast") jointly own 54.9% of the issued share capital of Birmingham Cable. General Cable PLC ("General Cable") owns the remaining 44.9%. TWH and Comcast hold their interests pursuant to a co-ownership agreement (the "Co-ownership Agreement"), which allocates beneficial ownership of the jointly owned shares between TWH and Comcast based on the amount each has contributed for the purchase of the shares. Beneficial ownership of the shares currently is divided equally between TWH and Comcast. Each party has the right to direct the voting of the shares beneficially owned by it. TWH and General Cable also own interests in Cable Corporation. Telewest Communications Group Limited, a wholly-owned subsidiary of the Company ("TWG"), General Cable and an affiliate of Comcast have entered into consulting agreements with Birmingham Cable and one of its affiliates (collectively, the "Birmingham Cable Companies") pursuant to which TWG provides consulting services relating to cable telephony operations, the Comcast affiliate provides consulting services relating to cable television operations and General Cable provides consulting services relating to business telephony operations. Each consultant also provides consulting services relating to the financial management of the Birmingham Cable Companies. Under TWG's consulting agreement, the Birmingham Cable Companies have agreed to pay TWG an annual fee based on the greater of (a) the number of dwelling units in the Birmingham Cable franchise area and (b) a percentage of the Birmingham Cable companies consolidated gross revenues. Each consulting agreement terminates in April 2000, subject to the Birmingham Cable Companies' right to extend the term of each agreement by two successive five-year periods and a final three-year period. The Birmingham Cable Companies have the right to terminate the agreements with TWG and the Comcast affiliate after April 2000 if TWH and Comcast and their affiliates together cease to be the holder of the largest percentage of the issued share capital of Birmingham Cable (constituting the "Principal Shareholder") and the management agreement referred to below is terminated for the same reason. TWG and a Comcast affiliate have entered into a management agreement with Birmingham Cable that gives TWG and Comcast the right, subject to the overall direction and control of the directors of the Birmingham Cable Companies, to manage the day-to-day business and affairs of the Birmingham Cable Companies. Pursuant to the Co-ownership Agreement, the Comcast affiliate is entitled to make all the decisions of the co-owners under the management agreement until the completion of construction passing 90% of the homes in the Birmingham Cable franchise area and Comcast and its affiliates beneficially own less than 20% of the shares jointly owned by TWH and Comcast and its affiliates. Notwithstanding this, TWG retains control over approval of budgets and business plans relating to cable telephony operations and Comcast retains control over the budgets and business plans relating to cable television operations. 30 33 Under Birmingham Cable's articles of association, the consent of holders of 50% or more in aggregate of its issued ordinary share capital ("Majority Investor") and, in certain cases, the holders of 331/3% or more (in aggregate) of its issued ordinary share capital ("Significant Investors") is required before Birmingham Cable and any of its subsidiaries can take certain actions relating to themselves or their businesses. Currently, TWH and Comcast are jointly a Majority Investor and General Cable is a Significant Investor. The Co-ownership Agreement generally requires TWH and Comcast to agree with respect to the exercise of their rights relating to their jointly-owned shares. TWH and Comcast (as Majority Investors) have the right to appoint four directors to Birmingham Cable's board of directors and General Cable has the right to appoint three directors. TWH and Comcast have the right to nominate the managing director of Birmingham Cable and General Cable has the right to nominate its Chief Financial Officer. Under the Co-ownership Agreement, the directors whom TWH and Comcast are entitled to designate by virtue of their jointly-owned shares will be designated by TWH and Comcast in proportion to the number of shares beneficially owned by each. As a result, currently TWH has the right to appoint two directors. The number of directors that TWH and Comcast have the right to appoint and maintain decreases in stages as their joint shareholding falls below 50% of the issued ordinary shares of Birmingham Cable. TWH and the other shareholders have also agreed to certain restrictions with respect to their right to apply for Cable Television Licenses and Telecommunications Licenses in areas adjacent to the Birmingham Cable franchise area. The articles of association of Birmingham Cable generally prohibit a shareholder from transferring legal or beneficial ownership of its shares without giving each other shareholder a right of first refusal to acquire its proportionate amount of such shares. Transfers by certain corporate shareholders to affiliates generally are excluded from this restriction. In February 1995, Birmingham Cable entered into a ten-year (pound)175 million loan facility to finance the construction of its network and operations (the "Birmingham Credit Facility"). Pursuant to the terms of the Birmingham Credit Facility, payments or distributions to the shareholders of Birmingham Cable, including payments of management fees, dividends, interest and principal on loans to Birmingham Cable from its shareholders, are restricted based on certain conditions related to the financial performance of Birmingham Cable and its subsidiaries. Certain financial covenants in the Birmingham Credit Facility were amended by a Supplemental Agreement dated March 12, 1997. It was a condition precedent to the closing of the Supplemental Agreement that the shareholders of Birmingham Cable contribute an aggregate of not less than (pound)7 million of debt or equity on or after January 1, 1997. Cable London. Cable London covers approximately 160 square kilometers and operates in the Camden, Haringey, Enfield, and Hackney and Islington franchise areas. Cable London has approximately 445,000 franchise homes and approximately 35,000 businesses (representing approximately 222,000 equity homes and approximately 17,500 equity businesses based on the Company's current share ownership of Cable London). 31 34 The Company and Comcast each own 50.0% of the issued share capital of Cable London. There is no voting arrangement between the Company and Comcast with respect to Cable London. The articles of association of Cable London generally prohibit a shareholder from transferring legal or beneficial ownership of its shares without giving each other shareholder a right of first refusal to acquire its proportionate amount of such shares. TWG and an affiliate of Comcast have entered into consulting agreements with Cable London pursuant to which TWG provides consulting services relating to telephony operations and the Comcast affiliate provides consulting services relating to cable television operations. Under TWG's consulting agreement, Cable London has agreed to pay TWG an annual fee based on the greater of (a) the number of dwelling units in the Cable London franchise areas or (b) a percentage of the gross revenues of Cable London from telecommunications services. The term of the consulting agreement expires in accordance with its terms in August 1998. The consulting agreement may be terminated by TWG upon a change of control of Cable London. In June 1995, Cable London entered into a two-year (pound)60 million loan facility to finance a portion of the costs of the construction of its network and operations (the "Cable London Facility"). Pursuant to the terms of the Cable London Facility, payments or distributions to the shareholders of Cable London, including payments of management fees, dividends and interest and principal on loans to Cable London from its shareholders, are prohibited, except for projected management fees financed by equity or subordinated loans. As a condition precedent to the completion of the Cable London Facility, the Company and Comcast (as the other principal shareholder of Cable London) entered into deeds of subordination that provide that any prohibited payments otherwise due to the shareholders from Cable London and its subsidiaries will accrue and not be paid for the duration of the Cable London Facility. Cable London is currently negotiating the terms of a new loan facility to replace the Cable London Facility, although there can be no assurance that such facility will be obtained. Cable Corporation. Cable Corporation covers approximately 490 square kilometers and operates in the Windsor franchise area (including Windsor, Slough, Maidenhead, Staines, Ashford and Iver) and the Middlesex franchise area (including the London boroughs of Hounslow and Hillingdon). Cable Corporation has approximately 294,000 franchise homes and approximately 17,500 businesses (representing approximately 49,000 equity homes and approximately 3,000 equity businesses based on the Company's current share ownership of Cable Corporation). TWH owns 16.5% of the issued share capital of Cable Corporation. The remaining 83.5% is owned by General Cable. TWG has entered into a consulting agreement with Cable Corporation and certain of its affiliated companies (the "Cable Corporation Companies") pursuant to which TWG provides consulting services relating to telephony operations. Under this agreement, the Cable Corporation Companies have agreed to pay TWG an annual fee based on the greater of (a) the costs incurred in providing consulting services to the Cable Corporation Companies or (b) a 32 35 percentage of the gross revenues of the Cable Corporation Companies from cable telephony business. The consulting agreement continues in effect until December 31, 1998 and thereafter is renewable from year to year unless terminated on one year's notice by either party. Under Cable Corporation's articles of association, the consent of the holders of not less than 15% of its issued ordinary share capital ("Significant Investors") is required before Cable Corporation and any of its subsidiaries can take certain actions in relation to themselves or their businesses. The Company is a Significant Investor. Each Significant Investor has the right to appoint up to two directors to Cable Corporation's board of directors. The articles of association of Cable Corporation generally prohibit a shareholder from transferring legal or beneficial ownership of its shares without giving each other shareholder a right of first refusal to acquire its proportionate amount of such shares. Transfers by certain corporate shareholders to affiliates generally are excluded from this restriction. In March 1996, Cable Corporation entered into financing arrangements including a nine-year (pound)160 million loan facility and certain finance leases to finance the construction of its network and operations (the "Cable Corporation Credit Facility"). Pursuant to the terms of the Cable Corporation Credit Facility, payments or distributions to the shareholders of Cable Corporation, including payments of management fees, dividends, interest and principal on loans to Cable Corporation from its shareholders, are prohibited so long as there are any amounts outstanding to the banks under the financing arrangements. Cable Corporation has defaulted on certain covenants under the Cable Corporation Credit Facility and is currently in negotiations for the modification of such covenants under the Cable Corporation Credit Facility. EMPLOYEES At December 31, 1996, the Company had 4,962 employees. None of these employees is covered by collective bargaining agreements. The Company believes that its relationship with its employees is good. COMPETITION The Company's cable television and cable telephony businesses compete with a wide range of companies using a variety of technologies. CABLE TELEVISION General As a result of the policy of the Independent Telecommunications Commission ("ITC") of not granting more than one broadband cable license within a franchise area for the foreseeable future, the Company does not compete for customers with other cable operators within its respective franchise areas. The Company does, however, compete with television programming provided by terrestrial stations, DTH satellite services, video cassette rental stores, satellite master antenna television systems and certain narrowband cable system operators, and will 33 36 compete with digital terrestrial services and may in the future compete with programming provided by video-on-demand and other entertainment services provided by PTOs. The Company also competes with other companies (which may include PTOs and other cable operators) for the award of new franchises, the purchase of existing franchises and new sources of capital. The principal current and potential competitors for the cable television business of the Company are the following: Broadcast Television viewing in the U.K. has long been one of the most popular forms of entertainment and daily viewing time in the U.K. has been among the highest in the world (weekly average of more than 26 hours per person during the fourth quarter of 1996). Four broadcast channels are the predominant source of television programming. Although the terrestrial television channels in the U.K. generally are perceived as providing high-quality programming, an independent market research study indicates that viewers have a preference for a wider variety of television programming. This study indicates that in the U.K., more than one-third of all viewing in homes with cable television or satellite services was of cable or satellite channels. The Company believes that acceptance of alternative programming, together with the relatively high penetration of DTH satellite services and VCRs (discussed below) evidences a willingness by many consumers in the U.K. to pay for additional programming. The Company believes that its primary competitive advantages over terrestrial television are significantly more programming options, access in the future to interactive and integrated entertainment, communication and information services and, in some areas, improved television reception. The Company believes that the principal competitive advantage of terrestrial television is its historical position as the leading source of in-home entertainment in the U.K. In December 1995, the ITC awarded a license for a fifth terrestrial broadcast channel, Channel 5, to Channel 5 Broadcasting Limited. Channel 5, which carries a mix of general entertainment programming, commences broadcasting in March 1997. DTH Satellite In a DTH satellite system, a satellite television service provider obtains programming from a variety of sources (including some of those used by the Company) and transmits the programming signal up to a satellite which then retransmits the signal down to customers. In order to receive satellite service in the U.K., the customer must have an outdoor reception dish, which generally is smaller and less expensive than the "C-band dish" typically used in the U.S., and some form of decoder. DTH satellite services are widely available in the U.K. and are becoming increasingly popular. DTH satellite penetration has increased from approximately 500,000 homes in 1989 to 3,446,000 at December 31, 1996. BSkyB is the leading supplier of satellite programming in the U.K. The "Sky Multi Channels" package provided by BSkyB (which includes ten channels 34 37 provided by Flextech or a provider in which an affiliate of TCI has an interest) offers customers 30 basic channels, four premium channels and four bonus channels. BSkyB is the principal competitor of the Company in pay television as well as one of its most important sources of programming. The Company purchases ten of the channels provided by BSkyB to its DTH satellite customers. BSkyB also has an interest in one of the two applicants for the U.K. digital terrestrial television licenses as described below. In order to encourage customers to change from DTH satellite service to cable service, the Company has implemented a trade-in program under which it offers a premium cable television service without charge for a certain period in exchange for a customer's satellite dish and related equipment. The Company believes that DTH satellite services will continue to be significant competitors of the Company in the future. However, the Company believes that cable television has a number of competitive advantages over DTH satellite service, including the following: (a) DTH satellite service involves up-front or ongoing costs for the purchase or rental of a dish and related equipment, which are substantially higher than the up-front or ongoing equipment costs for cable television, (b) satellite dishes are considered to be unsightly by many and are prohibited by some U.K. planning guidelines, (c) cable offers a sophisticated two way physical link, and in the future will offer interactive and integrated entertainment, telecommunications and information services in addition to television programming and (d) DTH satellite television generally does not provide local programming. The Company believes that the principal competitive advantage of DTH satellite service is the generally lower monthly service charges for basic services and premium services than comparable services provided by cable operators. BSkyB has indicated that it intends to launch a digital service in late 1997 which may provide up to 200 channels including mulitplexed movies, interactive services such as home shopping, home banking and "pay-per-view" sports and movies. The Company intends to launch its digital services at approximately the same time as the satellite digital offering although there can be no assurance that this will be achieved and a delay may have a negative impact on the Company's offering if it is launched after the satellite digital offering. Digital Terrestrial Television Broadcasting Under the Broadcasting Act 1996, the ITC has been given responsibility for the licensing and future regulation of digital terrestrial television which, on introduction, is expected to provide 30 or more terrestrial channels serving between 60% and 90% of the U.K. population. Existing terrestrial broadcasters are given guaranteed capacity to simulcast their existing analogue services. In January 1997, BSkyB, Carlton Communications and Granada Group announced they had formed a joint venture and applied (in competition with another applicant) to the ITC for three frequency ranges initially to provide 15 digital terrestrial television channels, which will broadcast programming that may include BSkyB programming currently available only through DTH satellite or cable television as well as programming from the BBC. Digital terrestrial television will broadcast from land-based transmitters and will be receivable by consumers with conventional aerials. A digital decoder box or integrated 35 38 digital television set would be needed to view the new channels, which are expected to have digital picture and sound quality. The introduction of digital terrestrial, as well as digital satellite television will provide additional competition for the Company. See "Certain Regulatory Matters -- Future Developments --Digital Broadcasting." Video Cassette Rentals In 1996, approximately 80% of the homes in the U.K. owned at least one VCR. The Company believes that this penetration evidences a willingness by many consumers in the U.K. to pay for programming in addition to that provided by the terrestrial broadcasters. The Company believes that the principal competitive advantages of cable television over videotape rentals include elimination of the need for consumers to leave their premises to pick up and return the video cassette and cost (cable programming is significantly less expensive on a per-program basis than rental of videotapes). The principal advantages of videotape rental over cable television are that it provides the consumer with more flexibility in selecting specific programming and the timing of the delivery of such programming and films generally are released earlier for video cassette rentals than for satellite and cable television. This advantage may be reduced by the development by cable operators of pay-per-view programming, which would give cable customers more control over the specific programming viewed and the timing of such programming. Video-on-Demand Video-on-demand will provide individual customers with the ability to request a specific program for viewing at a specific time. Currently, no video-on-demand service is commercially available in the U.K. BT has undertaken a pilot program for this service to the homes of a limited number of BT employees. However, the successful introduction of a video-on-demand service in the Company's franchise areas, particularly by a PTO, would result in the services of the Company being subject to increased competition. SMATV and Narrowband Systems SMATV systems receive television signals from either broadcast or satellite sources and then distribute them by cable to a discrete area of customers, typically within a limited geographic area (such as a block of flats) to less than 1,000 homes. Narrowband systems, which typically serve more than 1,000 homes, are underground cable distribution systems that have significantly less channel capacity than the broadband systems used by the Company. The narrowband systems carry only a limited range of broadcast and satellite programming and provide no voice telephony services. Most narrowband systems are relatively old and serve only limited geographical areas within certain of the Regional Franchise Areas (i.e., the Avon and Cotswolds, North East and South East Regional Franchise Areas). The Company believes that currently there are only a few SMATV systems licensed for or operating in the franchise areas of the Company and the Company has a right of first refusal on any new SMATV systems license issued for its franchise areas. There also are a number of old narrowband systems that are licensed for or operating in the franchise areas of the Company. The ITC has asked the Company to specify the date by which each of the Regional Franchise Areas will be in a position 36 39 to serve all the customers of the respective old narrowband systems in their franchise areas and has indicated that it will terminate the licenses held by such narrowband operators at such times. The Company currently expects that all such narrowband licenses will be terminated by the ITC by 1998. Other Cable Operators Although cable operators in the U.K. generally co-operate on a variety of technical, programming and marketing matters (such as through London Interconnect), the operators do compete for the award of new franchises, the purchase of existing franchises and sources of capital. Certain cable operators that compete with the Company now or in the future may have greater financial resources or other advantages which may increase their likelihood of obtaining desirable franchises. New Technologies The extent to which new media and technologies will compete with cable television systems in the future cannot be predicted and such media or technologies may become dominant in the future and render cable television systems less profitable or even obsolete. CABLE TELEPHONY General BT is the largest provider of telephony services for residences and businesses in the U.K. Historically, Mercury has focused on the business market and long-distance and international telephony services, and has attempted to increase its share of the business telephony market. Cable operators have started to expand into the telephony market and, according to the ITC, there were approximately 2,039,081 cable telephony lines in the U.K. as at December 31, 1996, as compared to approximately 1,287,000 as at December 31, 1995. BT BT is the principal competitor of the Company in providing telephony services to residential and small-and medium-sized business customers. BT has an established market presence, fully-built network and resources substantially greater than those of the Company. The Company seeks to compete with BT primarily by emphasizing the competitive cost and, to a lesser extent, service advantages of its cable telephony services. To date, the Company generally has been able to price its cable telephony call charges below those of BT. There can, however, be no assurance that it will be able to continue to do so in the future. BT currently is subject to regulatory controls over the prices it may charge customers. See "Certain Regulatory Matters --Cable Telephony -- Price Regulation." As a result of these controls, BT has in the past implemented and will in the future be required by its Telecommunications License to reduce its prices further in each of the next few years. The 37 40 Company has modified its rates in order to maintain its price advantage over BT. There can be no assurance, however, that any such price cuts will not adversely impact the profitability of the telephony operations of the Company. The Company believes that BT's competitive strength has been enhanced until recently by the lack of number portability in the U.K. The Company believes that many consumers have been reluctant to transfer their telephony service away from BT or Mercury service until number portability was available. The Company began offering number portability in some of its Regional Franchise Areas in September 1996 and currently is rolling out the service in all of its Regional Franchise Areas. See "Certain Regulatory Matters -- Cable Telephony - --Number Portability." Mercury Communications Limited The Company also competes with Mercury in providing business telephony services and, to a lesser extent, residential telephony services. The Company competes with Mercury primarily based on price and services offered. Mercury has (and following its announced merger will have) resources substantially greater than those of the Company, and there can be no assurance that Mercury will not expand its business or residential telephony services in the Company's existing markets or that the Company will be able to continue to compete successfully with Mercury. See "Industry Background and Company History -- Industry Background." Energis Communications Limited Energis has substantially finished construction of a national broadband network along existing electrical power pylons to provide telephony services. To date, Energis has not marketed residential telephony lines and generally has concentrated on the smaller business telephony market. The Company expects to compete with Energis primarily based on price and services offered. Other Competitors The Company also competes in its telephony business with (and may compete in the future with) new service providers such as Ionica L3 Limited and Colt Communications. Mobile cellular telephony networks such as Cellnet (in which BT has a 60% interest), Vodafone, Mercury One2One (in which affiliates of U S WEST have a 50% interest) and Hutchison Microtel's "Orange" service, also provide telephony service to customers. Currently, there are a number of competitors who either are offering national services or are looking to offer national services. The Company believes that this increased competition will lead to a broad range of new packages and promotions, thereby resulting in a decrease in the price of U.K. calls. For smaller customers, these new suppliers are likely to offer indirect services as they may not be able to justify direct connection. 38 41 ACQUISITIONS AND DISPOSALS Although the Company's strategy currently is to build on its existing customer base and increase penetration and revenues per customer, in order to increase revenues and economies of scale, the Company may from time to time acquire one or more new or existing franchises either in public tenders by the ITC or acquisitions from third parties. The Company believes that there may be attractive acquisition opportunities in the future as some of the existing franchise holders decide to divest all or a portion of their U.K. cable franchises due to shortages of capital or other reasons. In that regard, the Company has in the past and may in the future, engage in preliminary discussions regarding acquisitions and business combinations in the U.K., some of which may be significant and any of which may ultimately lead to acquisitions or business combinations. Any such acquisitions or combinations may be funded, to the extent available, from internally generated funds, the incurrence of indebtedness or the issuance of equity, or a combination thereof. CERTAIN REGULATORY MATTERS General Cable television and cable telephony operators in the U.K. are governed by legislation, regulations and licenses issued under the Cable and Broadcasting Act 1984 as construed by the Broadcasting Act 1990 (as amended by the Broadcasting Act 1996) (the "Broadcasting Act") and the Telecommunications Act 1984 (the "Telecommunications Act"). An operator of a cable television and cable telephony franchise in the U.K. covering more than 1,000 homes requires the following two licenses for each franchise area: (a) a telecommunications license (a "Telecommunications License"), granted under the Telecommunications Act by the Secretary of State for Trade and Industry (the "Secretary of State"), which authorizes the installation and operation of the telecommunications network used to provide cable television and telecommunications services, and (b) a cable television license (a "Cable Television License"), which authorizes the provision of cable television services within a defined geographical area and which may be either: (i) a prescribed diffusion service license ("PDSL"), granted under the Cable and Broadcasting Act 1984 prior to January 1, 1991 by the Cable Authority and continued in effect by virtue of provisions of the Broadcasting Act, which allows an operator to provide cable television services by means of a cable network; or (ii) a local delivery service license ("LDSL"), granted since January 1, 1991 under the Broadcasting Act by the ITC which allows an operator to deliver television and other licensed programming services by means of a licensed telecommunications network, including a cable network or microwave distribution system. 39 42 The Telecommunications Licenses and Cable Television Licenses contain various conditions concerning the operation of the licensed telecommunication system and the provision of broadcast services, respectively and, in the event that such conditions are breached, the Director General or the ITC, as appropriate, may take action to enforce compliance with such licenses. The ITC or the Secretary of State has the power ultimately to revoke such licenses. CABLE TELEVISION The Broadcasting Act The Broadcasting Act 1990 established the ITC to license and regulate commercial television services (terrestrial and satellite) and the Radio Authority to regulate radio services. The ITC's functions are, among other things, to grant licenses for television broadcasting activities and to regulate the commercial television sector by issuing codes on programming, advertising and sponsorship, monitoring programming content and enforcing compliance with the Broadcasting Act and license conditions. The ITC has the power to vary licenses and impose fines and revoke licenses in the event of a breach of the license conditions. The ITC also enforces ownership restrictions on those who hold or may hold an interest in licenses issued under the Broadcasting Act. The Broadcasting Act 1990 has been amended by the Broadcasting Act 1996. The licensing provisions remain substantially the same, although some amendments were made with regard to broadcast and radio services, including ownership restrictions (see below). Cable Television Licenses General. As at December 31, 1996, Cable Television Licenses had been granted for franchise areas covering approximately 17.9 million homes in the U.K. The ITC has indicated that for the foreseeable future it will grant only one LDSL for each geographical area. The ITC is also advertising and awarding LDSLs to extend coverage to those areas not otherwise licensed. To date, the Company has applied for three such licenses and it has been awarded two (for the Southport and Blackpool franchises), and has been notified by the ITC that its bid for the East Lothian franchise has been successful. LDSLs are awarded under competitive bids to the applicant submitting the highest cash bid (payable annually over the 15-year term of the LDSL), unless it appears to the ITC that there are "exceptional circumstances" (primarily geographic coverage) which make it appropriate to award the license to another applicant. In addition, all applicants must undertake to pay a percentage of qualifying revenue ("PQR") to the ITC in each year of the license together with an annual sum equal to the cash bid indexed against inflation plus certain other payments. Under the Broadcasting Act, cable operators may carry certain licensed services on their networks. Cable Television Licenses also require cable operators to ensure that advertising and certain foreign satellite programs carried by them as part of their services conform to the restrictions set forth in the codes on advertising, sponsorship and programming issued by the ITC. 40 43 All new LDSLs awarded to the Company since December 1994 include build milestone obligations. Term, Renewal and Revocation of Broadcasting Licenses. The Company holds both PDSLs and LDSLs. The terms and renewals of such licenses are governed by the Broadcasting Act as follows: (a) Each of the Company's PDSLs was issued for a 15-year term but applications may be made to the ITC for supplemental licenses which have the effect of extending the term of the PDSLs for up to an additional eight years if the cable operator holds a 23-year Telecommunications License. Fees continue to be payable on the same basis as the PDSLs, but no PQRs or sums equal to the cash bids will be payable during this extended term. If the Company elects to extend the PDSL (as the Company has done in certain cases), upon expiration of such PDSLs as so extended, the Company would be required to apply for a new LDSL under the competitive bid procedures described above. If the Company elects not to extend a PDSL, the Company may apply to the ITC (no earlier than five years prior to the expiration of the PDSL) for a 15-year LDSL with respect to which it must agree with the ITC on the amount of the cash bid and the PQR payments that will be payable over the term of the LDSL. (b) Each of the Company's LDSLs was issued for a 15-year term and this term corresponds to the term of the predecessor PDSL or to a term commencing on December 31, 1990, whichever is later. The term of the Company's LDSLs may not be extended, but the Company may apply to the ITC (no earlier than five years prior to the expiration of the LDSL) for a new 15-year LDSL, with respect to which it must agree with the ITC on the amount of cash and PQR payments that will be payable over the term of the LDSL. The ITC can, after consultation with the Department of Trade and Industry (the "DTI") and the Director General, revoke a Cable Television License if an operator fails to comply with its conditions or with any direction of the ITC and the ITC considers revocation to be in the public interest. If there is any change in either the nature or characteristics of an operator that is a corporate entity, or any change in the persons controlling or having an interest in it, the ITC can revoke the license if it would not have awarded the license had the new ownership or control existed at the time the application for the license originally was considered. The ITC also can impose fines and shorten the license period for licenses issued under the Broadcasting Act. A Cable Television License is transferable with the consent of the ITC. Ownership Restrictions. The ITC has a general duty to ensure that Cable Television Licenses are held by "fit and proper" persons and may exercise control over who may hold a license where financial assistance is provided to, or influence is exercised over, a licenseholder which may produce results adverse to the public interest. The Broadcasting Act also contains specific restrictions on the types of entities which may hold Cable Television Licenses or interests therein. Cable Television Licences may not be held by, among others, the BBC, a local authority, a religious or political body (or one of its officers) or any advertising agency or any entity controlled by it. 41 44 The Secretary of State is also empowered to control accumulations of interests in different licensed activities. Price Regulation. Cable television pricing in the U.K. is not subject to pricing restrictions, including pricing limitations, rate of return assumptions or similar mechanisms of the kind imposed under U.S. cable regulations. However, cable television pricing is subject to fair trading regulation by the ITC and to the application of general competition law. Digital Broadcasting The Broadcasting Act 1996 introduced provisions for the licensing of digital terrestrial broadcasting and introduced a "must carry" requirement on cable companies where both program provider and cable operator use digital technology to ensure the universal availability of designated free-to-air service channels. Must carry obligations concerning public service channels already apply to holders of PDSLs. The Broadcasting Act 1996 permits the initial availability of six television multiplexes, or frequency bands giving substantial national terrestrial coverage, each with the ability to carry several television channels. The new legislation includes provisions for the ITC's licensing of "multiplex providers", who would initially be allocated, in aggregate, the six multiplexes for 12-year license periods. Each multiplex provider will contract with broadcasters for the transmission of the broadcasters' television services via its allocated frequency band. The BBC has been separately allocated its own multiplex on which it has announced it will broadcast its existing and additional broadcast services. The Channel 3 companies and Channel Four have applied to the ITC for another multiplex, on which they are required to simulcast their existing analogue services, with capacity available for additional services. The ITC announced on October 31, 1996 that it would accept applications for licenses to provide terrestrial digital television services. On January 31, 1997, the deadline for applications, the ITC had received two competing applications for three of the multiplexes. One of the applicants is a joint venture by BSkyB, Carlton Communications plc and Granada Group plc. S4C, the Welsh fourth channel, has applied for another multiplex, on which half the capacity in England, Scotland and Wales is reserved for Channel 5, and the other half would be for S4C. The ITC had indicated it may award the licenses in Spring 1997. The Advanced Television Services Regulations, which implemented the Advanced Television Services Directive (Council Directive 95/47/EC on the use of standard for the transmission of television signals) (the "ATS Regulations") came into effect on January 7, 1997. The ATS Regulations cover the provision of digital television services by means of conditional access systems. They also amend the Telecommunications Act 1984 to include subscriber management services as telecommunications services, and the systems over which these services are provided as telecommunication systems, in each case subject to the general telecommunications licensing and regulatory regime. The ATS Regulations amended existing telecommunications licences so that conditional access services may only be provided under the Class License for the running of telecommunications systems for the provision of conditional access services (the "Conditional Access Class License"). The ATS Regulations impose an enforceable statutory duty on the provider of conditional access services to ensure that the system used to provide those services has the necessary technical capability for cost effective transcontrol at cable head-ends allowing for the possibility for full control by cable television 42 45 operators at local or regional level of the services using that conditional access system. "Transcontrol" is the process by which the conditional access operator's control data is removed and replaced so as to enable the rebroadcast of the programming using the cable operator's own conditional access system. There is also a supplemental duty on the conditional access service provider to co-operate with the cable television operator (including by provision of information on a timely basis) to ensure that the latter can take advantage of the primary duty. The ATS Regulations impose duties on the operators of conditional access services who do not simply self-provide (i.e., who do not produce and market those services to third parties) to offer technical services to broadcasters of digitally transmitted services on fair reasonable and non-discriminatory terms so that viewers can receive the broadcasters' services over their own networks. Apart from the effect of the ATS Regulations, the provision of conditional access services is regulated under the Conditional Access Class License, granted on January 7, 1997. The Conditional Access Class License regulates the provision of encryption services, subscriber authorization services, subscriber management services and any other conditional access service in connection with digital television services. The provider of such services is required, unless it is only a self-provider, to offer them to broadcasters on a fair, reasonable and non-discriminatory basis and to co-operate to ensure the interconnectivity and interoperability of its system so that the relevant services can be provided. Where a cable operator retransmits a broadcaster's digital television services, the operator of a conditional access service who provides conditional access services to the broadcaster must co-operate with the cable operator so that the cable operator can transcontrol and re-transmit those services cost-effectively and without incurring unnecessary and unreasonable expense. The Conditional Access Class License also incorporates the "fair trading" condition and other conditions including those relating to prohibition on undue preference and undue discrimination, linked transactions, publication of charges, essential interfaces, intellectual property rights and separation of financial accounts. The Director General has published, on a consultative basis, draft guidelines on the operation of the Conditional Access Class License and final guidelines are expected shortly. Media Ownership The Broadcasting Act 1996 amends the media ownership rules contained in the Broadcasting Act 1990. It relaxes the earlier rules limiting ownership between terrestrial television, satellite and cable broadcasters, except for those broadcasters which are already more than 20% owned by a newspaper with more than 20% national newspaper circulation. Qualifying terrestrial broadcasters are now allowed to have controlling interests in cable and satellite companies, provided their total interests do not exceed 15% of the total television market (defined by audience share including public service broadcasters) and qualifying cable companies will be able to control terrestrial television companies, subject to the 15% total television market limit and certain restrictions on the number of terrestrial licenses held. Newspaper groups with less than 20% national newspaper circulation are now able to control television broadcasters constituting up to 15% of the total television market, subject to a limit on the number of terrestrial licenses held, unless the ITC decides that such control would be against the public interest. Newspaper companies, the license holders of Channel 3 and Channel 5 and satellite and cable broadcasters, are to have the ability to control any number of digital terrestrial television licenses, in addition to any analogue licenses. 43 46 Previous U.K. Government proposals have also contemplated a more integrated system of media ownership and control in the longer term, to take account of the increasing number of broadcasters and technological convergence, and involving regulation of the media-market as a whole. The Company can give no assurance as to whether these proposals for regulation will be enacted or, if they were enacted, as to what their content would be or what effect they might have on the Company's business. CABLE TELEPHONY The Telecommunications Act The Telecommunications Act provides a licensing and regulatory framework for telecommunications activities in the U.K. and established the office of the Director General (supported by OFTEL), as an independent regulatory authority. Telecommunications policy is overseen by the DTI. The Secretary of State also has primary licensing authority under the Telecommunications Act, although he may delegate that authority to the Director General. The principal functions of the Director General are, among other things, to monitor and enforce compliance with Telecommunications License conditions, establish and administer standards for telecommunications equipment and contractors, investigate complaints and exercise certain functions to promote or ensure competition in telecommunications markets. The Director General may modify Telecommunications Licenses either with the agreement of the licensee following a statutory period of public consultation or following a report of the MMC. The Director General is also empowered to issue enforcement orders requiring compliance with Telecommunications License conditions which have been breached. Telecommunications Licenses General. A Telecommunications License authorizes a cable operator to install and operate the physical network used to provide cable television and telecommunications services. It also authorizes the operator to connect its system to other television and telecommunications systems, including those operated by the terrestrial broadcasting authorities, satellite broadcasters and PTOs. Although the Telecommunications License granted to a cable operator is for a particular franchise area, it is not exclusive and, as a result, a cable telephony operator is subject to competition in its franchise area with respect to the provision of telephony services from PTOs (such as BT, Mercury and Colt) and other telephony service providers. A cable operator's Telecommunications License contains conditions regulating the manner in which the licensee operates its telecommunications system, provides telecommunications services, connects its systems to others and generally operates its business. A cable operator's Telecommunications License also contains a number of detailed provisions relating to the technical aspects of the licensed system (e.g., numbering, metering and the use of technical interfaces) and the manner in which the licensee conducts its business (e.g., publicity of certain prices, terms and conditions). In addition, a cable operator's Telecommunications License contains prohibitions on undue preference and discrimination in providing service and unfair cross-subsidy of other services. The cable operator's Telecommunications License also 44 47 requires the licensee to comply with certain codes of practice and to provide information which the Director General may require to carry out his statutory functions. All the Company's Telecommunications Licences are due to be amended by the Director General of OFTEL to replace a number of existing conditions dealing with specific forms of anti-competitive behavior with a "fair trading" condition. This will enable the Director General to act against anti-competitive behavior such as predatory pricing and undue cross-subsidization. The Director General has published guidelines on the types of behavior which he considers to be anti-competitive and on the enforcement procedure to be used. In addition to those Telecommunications Licenses obtained for its cable franchise areas, the Company was also awarded Telecommunication Licenses on January 14, 1997 for all those geographic areas for which it does not hold Broadcasting Licenses and an International Facilities Licences on December 17, 1996. The fees payable for the Telecommunications License consist of an initial fee payable on the grant of the license and annual fees thereafter. The fees are based on a proportion of the costs of the Director General in exercising his functions under the Telecommunications Act. A Telecommunications License is not transferable. However, a change of control of a licensee may be permitted subject to compliance with a notification requirement, provided the proposed change is not, in the opinion of the Secretary of State, against the interests of national security or relations with the government of a country or territory outside the U.K. Network Construction. Other than for LDSL licenses granted since December 1994, each Telecommunications License prescribes milestones that require the licensee to construct its network to pass a specified number of premises by certain dates. All but the final milestones may be varied by the Director General "if he considers it to be in the interests of sound commercial development" of the system. The final milestone can be modified only following a public comment period and with the approval of the Director General. If the milestones are not met, the Director General may take enforcement action which, if not complied with, could result in the revocation of the Telecommunications License by the Secretary of State. A cable operator is not required to provide voice telephony services, but where it does so and achieves a 25% or more share of the relevant market (as determined by the Director General) within its licensed area, the licensee may, at the direction of the Director General, be required to ensure that voice telephony services are available to anyone in the licensed area who reasonably requests them. No such direction has been received by the Company. Under a Telecommunications License, the cable operator is subject to and has the benefit of the Telecommunications Code promulgated under the Telecommunications Act. The Telecommunications Code provides certain rights and obligations with respect to installing and maintaining equipment such as ducts, cables and cabinets on public or private land (including the installation of equipment on public highways). Cable operators also have the benefit of the New Roads and Street Works Act 1991 which provides them with the same rights and responsibilities with respect to construction on public highways as other public utilities. Cable operators generally are required to post bonds with local authorities in respect of their obligation to ensure 45 48 reinstatement of roads and streets in the event the operators becomes insolvent, ceases to carry on business or has its Telecommunications Licenses terminated. In order to install equipment on private property, cable operators must obtain the agreement of occupiers, property owners and others. Term, Renewal and Revocation of Telecommunications Licenses. Telecommunications Licenses for cable operators originally were granted for an initial period of either 15 or 23 years (depending on the technology used by the licensee), commencing on the date service was first provided to customers. In July 1992, following the Duopoly Review, technology-related discrimination in license length was abandoned. The U.K. government invited all holders of 15-year Telecommunications Licenses to apply for new 23-year licenses. However, a licensee also had the right to extend a 15-year Telecommunications License to 23 years if it provided certain technical undertakings within five years of the date of the original license grant. To date, the Company has given such undertakings with respect to all of its Telecommunications Licenses and, consequently, the Company's Telecommunications Licenses will expire at various times between 2008 and 2017. Upon expiration, a Telecommunications License cannot be renewed and application must be made for a new license. A Telecommunications License may be revoked if the licensee fails to pay the license fees when due, if the licensee fails to comply with an enforcement order, upon the occurrence of certain insolvency-related events or if any Cable Television License relating to a licensee's system is revoked. A Telecommunications License may also be revoked if, among other things, the licensee fails to give the required notification to the DTI of changes in shareholdings and agreements affecting control of the licensee or if the DTI concludes that any such change would be against the interests of national security or the U.K. government's international relations. Duopoly Review In 1991, the U.K. government concluded in its Duopoly Review that the termination of the duopoly policy (which permitted only BT and Mercury to operate local, national or international fixed-link networks in the U.K. to provide public telephony services) might increase competition and benefit consumers in the U.K. telecommunications market. As a result, the U.K. government revised its policy and determined that applications for licenses would be considered from any person seeking to operate new telecommunications networks over local or national fixed links within the U.K. Such licenses normally would be granted subject to the general statutory duties of the Director General to ensure the provision of telecommunications services, to satisfy all reasonable demands for them, and the ability of a person providing the services to finance their operations. At the time of the Duopoly Review, the exclusive right of BT and Mercury to provide international fixed links within the U.K. was maintained. On December 17, 1996, the Government removed this protection and licensed more than 40 companies (including the Company) to provide full international telecommunications facilities. 46 49 Interconnect Arrangements The ability of cable operators to provide viable voice and other telecommunications services is dependent on their ability to interconnect cost-effectively with the telecommunications networks of the other PTOs in order to complete calls that originate from a customer on their cable network but that terminate off their network or that originate from a customer off their cable network and terminate on their network. Since the Duopoly Review, cable operators with contiguous franchises have been able to connect their networks without regard to whether they are under common ownership without using the services of BT or Mercury, and with national telecommunications licenses, cable operators are able to link non-contiguous franchises over their private networks (such as the Company's Interfranchise Network). PTOs are required under their telecommunications licenses to enter into interconnection agreements with other PTOs such as the Company (if requested to do so by such a PTO), and the Company has interconnection agreements with BT, Mercury and Telstra, as well as certain other cable operators. The BT agreements may be terminated by either party upon two years' notice, the Mercury agreement may be terminated by either party upon one years' notice and, the Telstra Agreement may be terminated by either party on 90 days notice (but not to take effect prior to September 3, 1997). If the Company is unable to negotiate acceptable terms (including pricing) with BT, Mercury or Telstra in connection with any continuation or extension of these agreements or scheduled reviews of these agreements, the Company may request that the Director General determine such terms. A recent case has established that it is possible for a regulated company to challenge in the U.K. courts a determination by the Director General of terms of interconnection agreements. The Director General also has the power to make determinations in respect of certain obligations of any party under an interconnection agreement. OFTEL currently determines standard interconnect charges. The first interim charge determination covered the period from April 1, 1995 to March 31, 1996. Interim charges are based on forecast financial statements (on a fully allocated costs basis). OFTEL is currently assessing final charges based on BT's final financial statements for that period. A draft determination was published by OFTEL in February 1997. Final charges may involve a readjustment of charges made under the interim determination where appropriate. At the end of 1996, OFTEL published interim charges for the period from April 1, 1996 to March 31, 1997, which will be finalized later in 1997 or in early 1998. On March 20, 1996, the Director General published a consultation paper in which OFTEL proposed basing interconnection charges on forward looking incremental costs. It is proposed that this would take effect from October 1997, subject to a network price cap. This would impose an RPI-X% cap on interconnect prices. Within that cap it is proposed that OFTEL would impose floors and ceilings for interconnection services which would control BT's prices for its various interconnection services. BT's prices are also subject to control by the fair trading condition in its license which prohibits anticompetitive charging and other behavior. 47 50 In June and December 1996, the Director General published statements in which he made it clear he is proposing to replace the annual determination of charges with a system of network controls for those services which are not competitive, using baskets of interconnection services, each subject to a charge cap formula of RPI minus X%. Charges for those services which are expected to become competitive during the next price control period (i.e., from October 1997 until the middle of 2001), will not be included in the network baskets, but will be governed by safeguard caps of RPI plus 0%. Charges for those services which are expected to become competitive before October 1997 or which are determined by the Director General to be competitive during the control period, will be free of network controls. The value of "X" has not as yet been decided and neither have the starting values of the various interconnect charges and the "floors and ceilings" of prices within the baskets. Further work on these areas and on the model by which the Director General is to base charges on incremental costs is to be carried out in 1997. The current proposals were subject to public consultation, which ended on February 13, 1997. OFTEL has said it will publish a further informal consultative document and its final proposals with license modifications for formal consultation in 1997. If BT agrees to them, these modifications to BT's license (including with respect to the new interconnect charge regime) will become effective on October 1, 1997. If BT were to fail to agree, there may be a reference to the Monopolies and Mergers Commission (the "MMC"). In the period before recommendations of the MMC were implemented, the current interconnection regime would continue. Price Regulation Although to date the Company generally has been able to price its cable telephony call charges below those of BT, there can be no assurance that it will be able to continue to do so in the future. BT currently is subject to controls over the prices it may charge customers, including a requirement that the overall charges it makes for a basket of services, including local, long-distance and international calls, which for the period up to July 31, 1997 may not be increased by more than (or must be reduced by) an amount equal to the change in the Retail Price Index ("RPI") less 7.5% per annum. As part of its ongoing review of BT's pricing, in February 1996 OFTEL removed the price controls on BT's line charges, thus enabling BT to rebalance line and call charges. For the period July 31, 1997 to July 31, 2001, OFTEL has implemented a new price cap on BT of RPI-4.5%. This price cap is to be applied to BT residential customer prices only, and all BT business prices are excluded. In general, the price controls impose downward pricing pressure in the U.K. telephony market, and any change in such controls may influence the Company's pricing policies. BT's license has also now been modified to include the fair trading conditions which prohibits BT from engaging in anti-competitive activity. This provision gives OFTEL broad powers to stop anti-competitive activity by BT, including with respect to pricing. Procedural guidelines have been issued regarding the quality of the condition. The level of cable telephony service prices charged by the Company and other service providers other than BT currently are not regulated by the Director General (although they are subject to general competition law provisions). However, conditions prohibiting undue 48 51 discrimination and unfair cross-subsidy are contained in the Company's Telecommunications Licenses, and will shortly be replaced by a "fair trading" condition and associated obligations. Number Portability In September 1996, with the introduction of "number portability" in the U.K., the Company began offering BT and Mercury customers (residential and business) the opportunity to transfer their service to the Company without changing their existing telephone number. As of March 1, 1997, the Company had implemented number portability in four of the seven Regional Franchise Areas and to date customer interest has been strong, with 32,813 lines being transferred to the Company during the period of September 1, 1996 through February 28, 1997 and no requests for line transfers from the Company during the same period. The Company expects to have number portability introduced in all of its franchises by September 1997. Restrictions on National PTOs - Video-on-Demand The Duopoly Review maintains restrictions upon BT and other national PTOs (except Ionica and Liberty) which prevent BT from conveying or providing entertainment services (such as the cable television services currently provided by the Company) over their national telecommunications networks. The U.K. Government stated that the restrictions upon the conveyance of such services may be reviewed in 1998, but the restrictions regarding provision by the PTOs themselves would not be reviewed until at least 2001. The Duopoly Review policy did not, however, prevent the national PTOs from providing cable television services of the kind currently provided by the Company so long as such services are provided by separate subsidiaries of the national PTOs under separate licenses similar to those held by the Company This policy may be changed in the event of a change of government following the General Election to be held on May 1, 1997. Although full details are not available, it is understood that the Labor Party is prepared to lift the restrictions on BT in return for BT continuing to provide Internet access to schools and libraries. The ITC's policy of granting one broadband license for each geographic area ensured that no national PTO subsidiaries could compete directly with the Company in the provision of cable television services in the same area. BT currently owns and operates a single broadband cable franchise in the U.K., in Westminster, Central London and has been successful in its bid for the Milton Keynes franchise. Since April 1, 1994, such services may be provided locally by the national PTOs without requiring separate subsidiaries, however, all other licensing requirements, including the need for the national PTO to obtain an LDSL to provide cable services within each locality, apply. On September 29, 1993, the ITC issued a statement in which it concluded that a national PTO such as BT could provide a "video-on-demand" service nationally over its telecommunications network without requiring further regulatory approvals in respect of the conveyance of such services. A video-on-demand service was defined by the ITC as a service in which individual programs are transmitted to only one household at a time in response to a particular request. As such, a video-on-demand service in this context does not embody cable television services of the kind provided by the Company for simultaneous reception in multiple 49 52 residential households. The ITC noted that its conclusions were shared by other regulatory bodies (i.e., the DTI and OFTEL), but that the issue could only be definitively resolved in the courts. In a statement issued on December 7, 1993, the Director General emphasized his commitment to the Duopoly Review policies and noted his concern that a video-on-demand service which might be offered by BT should be made available on terms which are fully consistent with the U.K. policy on the competitive provision of telecommunication services. These policies have again been reaffirmed by Ministers with responsibility for telecommunications policy and by the Director General during the evidence to the enquiry conducted by the Trade and Industry Select Committee of the House of Commons (the "Select Committee") concerning optical fibre networks. The Select Committee issued a report in July 1994 and recommended certain changes intended to encourage the development of unfranchised areas by all PTOs and reduce uncertainty concerning current restrictions with respect to entertainment services. The ITC issued a statement on July 27, 1994 in which it confirmed that it attaches considerable importance to the stability of the existing regulatory environment. Both OFTEL and the DTI endorsed this view in November 1994. OFTEL published its response to the Select Committee's report and the DTI gave its response in a paper entitled "Creating the Superhighways of the Future: Developing Broadband Communications in the U.K." Both stressed the importance of developing broadband services together with the necessary broadband infrastructure so that customers can benefit from new opportunities in the future. The DTI paper concluded that it would not at this time undertake a fundamental revision of the regulatory regime covering cable and local delivery franchising. In February 1997, the Department of National Heritage re-affirmed the Government's commitment to this policy. 2. PROPERTIES The Company's principal properties consist of numerous offices, technical facilities, warehouses, customer services centers and retail outlets in the various Regional Franchise Areas and Woking, Surrey. As of April 1, 1997, the Company owned and leased an aggregate of approximately 750,000 square feet (258,000 square feet of which was owned and 492,000 square feet of which was leased). The Company's headquarters and network service center occupy approximately 80,000 square feet of leased space located in Woking, Surrey. The Company believes that its current properties are adequate for its current needs and additional space can be obtained on reasonable terms to accommodate future growth, if needed. 3. LEGAL PROCEEDINGS The Company has not been involved in any legal or arbitration proceedings which have had during the 12 months preceding the date of this Report, or which are reasonably likely to have, a significant effect on the Company's financial position, nor, so far as the Company is aware, is any such proceeding pending or threatened. 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 50 53 * * * * * EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instructions G(3), the following information is included as an additional item in Part I:
Name Age(1) Position Held ---- ------ ------------- Stephen J. Davidson 41 Chief Executive Officer Charles Burdick 45 Finance Director Lynn C. Rexroth 58 Chief Operations Officer Simeon Galpert 49 Senior Vice President of Finance(2) Bruce D. Langham 49 Senior Vice President of Digital Services Roger P. Wilson 45 Senior Vice President of Residential Services Geoffrey Cheetham 50 Vice President Business Services Howard Watson 33 Vice President Network Operations Victoria M. Hull 34 General Counsel and Company Secretary - ------- (1) As of March 1, 1997 (2) Mr. Galpert has submitted his resignation from the Company effective as of March 31, 1997.
Mr. Davidson has served as a director of the Company since April, 1994 and as the Finance Director of the Company from January, 1993 until August, 1996. He was appointed acting Chief Executive Officer in August, 1996 following the departure of Mr. Michels, and was confirmed as the Chief Executive Officer in February, 1997. Previously, he worked for four years at Bankers Trust Company in London where he was a Managing Director with responsibility for clients in the media business throughout Europe. Mr. Burdick was appointed Finance Director in February, 1997. He was acting Chief Financial Officer from September, 1996. Prior thereto, he was Vice President Finance and Assistant Treasurer at US WEST Inc. Prior to joining US WEST in 1990, he worked in Treasury and Corporate Development roles at Time Warner and Carnation International. Mr. Rexroth has served as Senior Vice President of Group Operations since January, 1996. Previously, he was Senior Vice President of Telecommunications of the Company since December, 1992. He has more than 32 years of experience with U S WEST in the areas of marketing, network, carrier service, finance, operations and regulatory matters. Before coming to the U.K., Mr. Rexroth's responsibilities included the provision of long-distance services and interconnection to over 500 independent telephone companies located in U S WEST's geographical area. He has been active in the U.S. States Telephone Association and other national and regional telephone company organizations. Mr. Rexroth's secondment term is scheduled to end in August, 1997. Mr. Galpert has served as Senior Vice President of Finance of the Company since June, 1994. Previously, he was a partner of the Westbury Consulting Partnership from 1993 to 1994 51 54 and group finance director and company secretary of the Birkdale Group PLC from 1991 to 1993 and Director of the Treasury of WPP Group plc from 1987 to 1991. Mr. Galpert resigned from his position as Senior Vice President of Finance effective as of March 31, 1997. Mr. Langham has served as Senior Vice President of Digital Services since September, 1996 and currently is responsible for the Company's digital service. Previously, from January, 1994, he was Senior Vice President of Operations for the Company's Midlands, Avon and Cotswolds, South East and London South Regional Franchise Areas. Prior thereto, he was Managing Director of the London South Regional Franchise Area from March 1993 to January 1994 and Managing Director of the Scotland Regional Franchise Area from 1991 to 1993. Prior to joining the Company, Mr. Langham was involved in the airline industry, where he held several senior positions, including Managing Director of Scottish European Airways Plc from 1989 to 1991. Mr. Wilson has served as Senior Vice President of Operations since September, 1996. Previously from October, 1995, he was responsible for the Company's Scotland, North East and North West Regional Franchise Areas. Mr. Wilson was also the Senior Vice President-Operations of SBCC from June, 1995 to October, 1995 From October, 1993 to October, 1995, Mr. Wilson was the Managing Director of Cable Midlands. From October, 1992 to September, 1993, Mr. Wilson was the Vice President of Marketing for the SBCC Group. From 1991 until September, 1992, Mr. Wilson was the Managing Director of Videotron Hampshire Limited. Prior to joining Videotron Hampshire Limited, Mr. Wilson was the Managing Director for Swindon Cable Limited from 1988 to 1991. Mr. Cheetham has served as Vice President of Business Services since March, 1995. Previously, from November 1991 to March 1995 he was the principal partner in Breath of Fresh Air. From September 1988 to October 1991 he was the General Manager of Marketing of British Telecom plc. Mr. Watson has served as Vice President of Network Operations since November, 1995. Previously, from June, 1993 to October, 1995, he was Director of Engineering. From 1991 to June, 1993 he was Engineering Manager of Cablecom Group of GPT. Ms. Hull has served as General Counsel and Company Secretary since July, 1994. Prior to joining the Company she was a solicitor in the corporate department of Clifford Chance, where she qualified in 1987. PART II 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS MARKET PRICE OF ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES; RECORD HOLDERS; DIVIDENDS The information required by this item is included in the 1996 Annual Report to 52 55 shareholders under the heading, "Share and ADS Information," "Registrar and Depositary" and "CREST - Share Settlement System" on page 88 and is incorporated herein by reference. CERTAIN TAX CONSEQUENCES OF OWNERSHIP OF ORDINARY SHARES AND ADSS. GENERAL The following generally summarizes the principal U.K. and U.S. federal income tax consequences of the purchase, ownership and disposition of Ordinary Shares or ADSs (evidenced by ADRs) to beneficial owners that are residents or citizens of the U.S. and hold the Ordinary Shares or ADSs as capital assets ("U.S. Holders"). BECAUSE THIS IS A GENERAL SUMMARY, PROSPECTIVE PURCHASERS OF ORDINARY SHARES OR ADSS WHO ARE U.S. HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL TAX CONSEQUENCES, AS WELL AS TO THE U.K. TAX CONSEQUENCES, OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES OR ADSS APPLICABLE IN THEIR PARTICULAR TAX SITUATIONS. The statements of U.S. federal income tax and U.K. tax law set out below are based (a) on the laws in force, and as interpreted by the relevant taxation authorities, as of the date of this Proxy Statement, and are subject to any changes (which may apply retroactively) in U.S. or U.K. law, or in the interpretation thereof by the relevant taxation authorities, or in the conventions between the U.S. and the U.K. relating to income and capital gains (the "Income Tax Convention") and estate and gift taxes (the "Estate and Gift Tax Convention"), occurring after such date and (b) in part, on representations of the Depositary and on the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms. This summary does not address the laws of any state or locality or any foreign government (other than the U.K.). Further, this summary does not address the tax consequences to particular classes of taxpayers that are subject to special rules including, without limitation, dealers in securities or currencies, insurance companies, tax exempt organizations, financial institutions, persons that hold their Ordinary Shares or ADSs as part of a straddle, hedging or "conversion transaction", persons whose functional currency is other than the U.S. dollar, tax-exempt investors or persons owning directly, indirectly or constructively, 10% or more of the Company's stock. This summary does not address the U.K. or U.S. tax treatment of persons who hold Ordinary Shares or ADSs through a partnership or other pass-through entity. Except to the limited extent discussed below, it does not consider the U.K. tax or U.S. tax consequences to a person other than a U.S. Holder (a "Non-U.S. Holder"). For purposes of the Conventions and the Code, U.S. Holders will be treated as the owners of the Ordinary Shares represented by ADSs evidenced by ADRs. Accordingly, and except as noted below, the U.K. tax and U.S. federal income tax consequences discussed below apply equally to beneficial owners of both Ordinary Shares and ADSs that are U.S. Holders. 53 56 TAXATION OF DIVIDENDS For the purposes of this summary, the term "Eligible U.S. Holder" means a beneficial owner of an ADS or an Ordinary Share (a) that derives and beneficially owns the cash dividend paid thereon, (b) that is an individual, a corporation, a trust or estate resident in the U.S. (and, in the case of a corporation, not also resident in the U.K. for U.K. tax purposes) for the purposes of the Income Tax Convention and (c) whose holding is not effectively connected with a "permanent establishment" through which the Eligible U.S. Holder carries on business in the U.K. with a "fixed base" in the U.K. from which the Eligible U.S. Holder performs independent personal services. Such term excludes, however, (a) a beneficial owner who owns at least 10% of the Ordinary Shares in respect of which the dividend is paid, (b) under certain circumstances, a corporation 25% or more of the capital of which is owned directly or indirectly by one or more persons who are not individual residents or nationals of the U.S. and (c) a U.S. corporation that controls, directly or indirectly (either alone or with one or more associated corporations), 10% or more of the voting stock of the Company. The Company is required, when paying a dividend in respect of the Ordinary Shares, to account to the U.K. Inland Revenue for a payment known as advance corporation tax ("ACT"). The rate of ACT at present is equal to 25% of any dividend paid to shareholders, which is equivalent to 20% of the sum of the dividend and the related ACT. An Eligible U.S. Holder is entitled under the Income Tax Convention and current U.K. law to claim from the U.K. Inland Revenue a refund of an amount equal to the ACT paid by the Company in respect of the dividend (the "Tax Credit Amount"), but subject to a 15% U.K. withholding tax on the combined sum of the dividend paid and the related Tax Credit Amount. For example, assuming continuance of ACT at the rate of 25% of a dividend paid, a dividend of (pound)8.00 paid to such an Eligible U.S. Holder would generally entitle the Eligible U.S. Holder to claim (pound)0.50 (a Tax Credit Amount of (pound)2.00 less a withholding of (pound)1.50) from the U.K. Inland Revenue, giving a total cash received, after U.K. taxes but before U.S. taxes, of (pound)8.50. If the Eligible U.S. Holder is a U.S. trust or estate, the Tax Credit Amount will be available only to the extent that the income derived by such trust or estate is subject to U.S. tax as the income of a resident either in its hands or in the hands of its beneficiaries, as the case may be. For U.S. federal income tax purposes, the gross amount of a dividend plus the Tax Credit Amount, including the 15% U.K. withholding tax thereon, (a) will be included in gross income by a U.S. Holder and (b) will be treated as foreign source dividend income to the extent paid out of current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Subject to certain limitations, the 15% U.K. withholding tax will be treated as a foreign income tax eligible for credit against such Eligible U.S. Holder's federal income tax (or, alternatively, a deduction in computing such U.S. Holder's taxable income). The consequences of these limitations will depend on the nature and sources of each Eligible U.S. Holder's income and the deductions appropriately allocated or apportioned thereto. In general, no dividends received 54 57 deduction will be allowed with respect to dividends paid by the Company. The amount of the dividend will be the U.S. dollar spot value of the dividend on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars on such date. Exchange gain or loss, if any, recognized by an Eligible U.S. Holder on a sale or other disposition of pounds received pursuant to the dividend will generally be U.S. source ordinary income or loss. Arrangements exist with the U.K. Inland Revenue under which certain Eligible U.S. Holders of ADSs (i.e., (a) a U.S. corporation, (b) an individual resident in the U.S. and not resident in the U.K. or (c) a trust or estate all the beneficiaries of which are resident in the U.S. or Canada) generally will receive directly from the Company together with the payment of the associated dividend payment of the Tax Credit Amount to which such Holder is entitled, net of the applicable U.K. withholding tax, without the need to file a claim for refund. To claim the benefit of the arrangements, the registered holder must complete the declaration on the reverse of the dividend check confirming the Eligible U.S. Holder's entitlement to the Tax Credit Amount and present the check for payment within three months from the date of issue of the check. These arrangements can be terminated or altered without notice by the U.K. Inland Revenue. In addition, arrangements exist with the U.K. Inland Revenue under which an Eligible U.S. Holder of Ordinary Shares will receive payment of the U.K. tax credit at the same time as and together with the payment of the associated dividend. In order to receive such payment, the Eligible U.S. Holder must have the Ordinary Shares registered in the name of a nominee approved by the U.K. Inland Revenue for such purpose, and the nominee must follow certain procedural requirements. In addition, the qualifying holder must be either: (a) an individual who: (i) is not resident in the U.K. and does not retain the use of any accommodation in the U.K., (ii) has not during the previous four years been in the U.K. for as much as three months a year on average, or for a period or periods amounting in the aggregate to six months in the relevant U.K. income tax year; (iii) has not been absent from the U.S. for a complete U.S. tax year in any of the previous four years; (iv) does not have a permanent establishment in the U.K. and (v) does not own 10% or more of the class of shares in respect of which the dividend is paid; or (b) a corporation: (i) which is managed and controlled in the U.S. and does not have a permanent establishment in the U.K.; (ii) which does not, either alone or together with one or more associated corporations, control, directly or indirectly, 10% or more of the voting power in the Company; (iii) which does not own 10% or more of the class of shares in respect of which the dividend is paid; (iv) which is liable for U.S. tax on the dividend and (v) at least 75% of the capital of which is owned directly or indirectly by persons who are U.S. residents. These arrangements will be extended to trusts, estates in the course of administration, pension funds, foundations and similar bodies only with the prior approval of the U.K. Inland Revenue. Certain Eligible U.S. Holders who are not entitled to receive payment of the U.K. Tax Credit Amount from the Company with payment of the associated dividend but who, nevertheless, are entitled to a refund of the Tax Credit Amount, net of the U.K. withholding tax, must file a claim for the Tax Credit Amount in the manner described in U.S. Revenue Procedure 80-18, 1980-1 C.B. 623, as modified by U.S. Revenue Procedures 81-58, 1981-2 C.B. 678; 84-60, 1984-2 C.B. 504, and 90-61, 1990-2 C.B. 657. Claims for tax refund must be made within six years of the U.K. year of assessment (generally the 12-month period ending April 5 in each year) 55 58 in which the related dividend was paid. The first claim by a claimant for a tax credit under these procedures is made by sending the appropriate U.K. form (FD/13) in duplicate to the Director of the Internal Revenue Service Center with which the holder's last U.S. federal income tax return was filed. Forms may be available from the U.S. Internal Revenue Service Assistant Commissioner (International), 950 L'Enfant Plaza South, S.W., Washington, D.C. 20024, Attention: Taxpayers Service Division. Because a refund claim is not considered made until the U.K. tax authorities receive the appropriate form from the U.S. Internal Revenue Service, forms should be sent to the U.S. Internal Revenue Service well before the end of the applicable limitation period. Any claim by a claimant after the first claim by such a U.S. Holder for payment under these procedures should be filed directly with the U.K. Financial Intermediaries and Claims Office, Fitz Roy House, P.O. Box 46, Nottingham, England, NG2 1BD. Under Section 812 of ICTA 1988, the U.K. government has the power to deny the payment of associated U.K. tax credits under the Income Tax Convention to a corporation that controls, directly or indirectly, either alone or together with one or more corporations, which are treated as associated for the purposes of the Income Tax Convention, at least 10% of the voting power of the Company, if it or an "associated company" (as defined in Section 416 ICTA 1988) has a "qualifying presence" (as defined in Section 812 ICTA 1988) in a state in the U.S. which operates a unitary system of corporation taxation. These provisions will come into force only if the U.K. government so determines by statutory instrument. No such instrument has yet been made. Subject to the discussion below regarding backup withholding tax, a Non-U.S. Holder of Ordinary Shares or ADSs generally will not be subject to U.S. federal income or withholding tax on dividends received on Ordinary Shares or ADSs, unless such income is effectively connected with the conduct of a trade or business in the U.S. and, in general, in the case of a Non-U.S. Holder entitled to benefits under a tax treaty, attributable to a permanent establishment or fixed base in the U.S. TAXATION OF CAPITAL GAINS A U.S. Holder who is not resident or ordinarily resident in the U.K. for U.K. tax purposes will not be liable for U.K. tax on capital gains realized or accrued on the sale or other disposal of Ordinary Shares or ADSs unless the Ordinary Shares or ADSs are held in connection with a trade, profession or vocation carried on by such U.S. Holder in the U.K. through a branch or agency which constitutes a permanent establishment or fixed base and the Ordinary Shares or ADSs are or have been used, held or acquired for the purposes of such trade, profession or vocation of such branch or agency. A U.S. Holder will be liable for U.S. federal income tax on such gains to the same extent as on any other gains from sales or disposition of stock. Assuming that gain on the disposition of Ordinary Shares or ADSs would not be subject to U.K. tax, such gain would be U.S. source income for U.S. foreign tax credit limitation purposes. Deposits and withdrawals of Ordinary Shares by U.S. Holders in exchange for ADSs will not result in the realization of gain or loss for U.K. capital gains tax or U.S. federal income tax purposes. Subject to the discussion below of backup withholding, a Non-U.S. Holder of 56 59 Ordinary Shares or ADSs will not be subject to U.S. federal income or withholding tax on gain realized on the sale of Ordinary Shares or ADSs unless (i) such gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. and, in general, in the case of a Non-U.S. Holder entitled to benefits under a tax treaty, such gain is attributable to a permanent establishment or fixed base in the U.S. or (ii) in the case of gain realized by an individual Non-U.S. Holder, the Non-U.S. Holder is present in the U.S. for 183 days or more in the taxable year of the sale and certain other conditions are met. U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING U.S. Holders are generally subject to information reporting requirements with respect to dividends paid in the U.S. on Ordinary Shares or ADSs. Under existing regulations, such dividends are not subject to back up withholding. However, under proposed regulations such dividends paid in the United States would be subject to back up withholding. Non-U.S. Holders will not be subject to information reporting or back up withholding with respect to dividends on Ordinary Shares or ADSs, unless payment is made through a paying agent (or office) in the U.S. Non-U.S. Holders generally will be subject to information reporting (and, under proposed regulations, could be subject to back up withholding at a rate of 31%) with respect to the payment within the U.S. of dividends on Ordinary Shares or ADSs, unless the holder provides a taxpayer identification number, certifies to its foreign status, or otherwise establishes an exemption. U.S. Holders generally will be subject to information and back up withholding at 31% on proceeds paid from the disposition of Ordinary Shares or ADSs unless the U.S. Holder provides an IRS Form W-9 or otherwise establishes an exemption. Non-U.S. Holders generally will be subject to information reporting and back up withholding at a rate of 31% on the payment to or through the U.S. office of a broker, whether domestic or foreign, of proceeds from the disposition of Ordinary Shares or ADSs, unless the holder provides a taxpayer identification number, certifies to its foreign status or otherwise establishes an exemption. Non-U.S. Holders will not be subject to information reporting or back up withholding with respect to the payment by a foreign office of a broker of proceeds from the disposition of Ordinary Shares or ADSs provided, however, that, if the broker is a U.S. person or "U.S. related person," information reporting (but not back up withholding) will apply, unless the broker has documentary evidence in its records of the Non-U.S. Holder's foreign status, the Non-U.S. Holder certifies to its foreign status under penalties of perjury or otherwise establishes an exemption. For this purpose, a "U.S. related person" is a broker or other intermediary that is a controlled foreign corporation for U.S. federal income tax purposes or that is a person 50% or more of the gross income from all sources of which, over a specified three year period, is effectively connected with the conduct of a U.S. trade or business. The amount of any back up withholding will be allowed as a credit against such holder's U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the U.S. Internal Revenue Service. 57 60 PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS The Company generally will be a passive foreign investment company ("PFIC") for U.S. federal income tax purposes for any taxable year (i.e., the period from January 1 to December 31) in which either (a) 75% or more of its gross income is passive income or (b) on average for the taxable year, 50% or more of its assets (measured by U.S. tax basis) produce or are held for the production of passive income. The Internal Revenue Service has indicated that cash balances, even if held as working capital, are considered to be passive assets that produce passive income. As of the date of this Proxy Statement, the Company does not believe it is a PFIC for U.S. federal income tax purposes, and, based on current projections, the Company does not anticipate that it will become a PFIC. No assurance can be given, however, that the Company will not become a PFIC in the future. The Company will monitor its status and, promptly following the end of any taxable year, will notify shareholders if it believes that it is properly classified as a PFIC for that taxable year, in which case it will comply with the reporting requirements necessary for U.S. Holders to elect to treat the Company as a "qualified electing fund" (a "QEF election"). If the Company were a PFIC, U.S. Holders of Ordinary Shares or ADSs may suffer unfavourable U.S. federal income tax consequences. This summary does not address the consequences were the Company determined to be a PFIC. U.S. Holders should consult their own tax advisers concerning the U.S. tax consequences of holding Ordinary Shares or ADSs if the Company were considered to be a PFIC, including the consequences of making a QEF election. U.K. ESTATE AND INHERITANCE TAX An Ordinary Share or ADS beneficially owned by an individual U.S. Holder who is domiciled in the U.S. for the purposes of the Estate and Gift Tax Convention and is not domiciled in the U.K. for such purposes is not subject to U.K. inheritance tax on the individual's death or U.K. gift tax on a gift made by the individual during his lifetime except where the Ordinary Share or ADS is part of the business property of a U.K. "permanent establishment" of the individual or pertains to a U.K. "fixed base" of an individual used for the performance of independent personal services. The Estate and Gift Tax Convention generally provides for tax paid in the U.K. to be credited against any tax payable in the U.S. and for tax paid in the U.S. to be credited against any tax payable in the U.K., based on priority rules set forth in that Convention, in a case where an Ordinary Share or ADS is subject both to U.K. inheritance tax and to U.S. federal gift or estate tax. There are special individual rules applying to trusts. Ordinary Shares or ADSs held in a trust created by a U.S. Holder who is not domiciled in the U.K. normally will fall outside the scope of U.K. inheritance tax. STAMP DUTY AND STAMP DUTY RESERVE TAX Stamp duty reserve tax at the then-applicable rate arises upon the deposit with the Depositary of the Ordinary Shares. The current rate of stamp duty reserve tax is (pound)1.50 per (pound)100 (or part thereof). The stamp duty reserve tax on the initial deposit of the Ordinary Shares represented by the ADSs was paid by the Company. On the transfer of further Ordinary Shares to 58 61 the Depositary, stamp duty reserve tax will be payable by the Depositary and under the Deposit Agreement, holders of ADRs must pay an amount equal to such tax to the Depositary. Provided that the instrument of transfer is not executed in the U.K. and remains at all subsequent times outside the U.K., no U.K. stamp duty will be payable on the acquisition or transfer of ADSs evidenced by ADRs, nor will an agreement to transfer ADSs evidenced by ADRs give rise to a liability to stamp duty reserve tax. A transfer of Ordinary Shares by the Depositary or its nominee to the beneficial owner of the relevant ADS or its nominee when the beneficial owner is not transferring beneficial ownership will give rise to U.K. stamp duty at the rate of 50p per transfer. Purchasing Ordinary Shares, as opposed to ADSs, will normally give rise to a charge to U.K. stamp duty or stamp duty reserve tax at the rate of 50p per (pound)100 (or part) of the price payable for the Ordinary Shares. Stamp duty and stamp duty reserve tax generally are the liabilities of the purchaser. Where such Ordinary Shares are later transferred to the Depositary's nominee, further stamp duty or stamp duty reserve tax will normally be payable at the rate of (pound)1.50 per (pound)100 (or part thereof) of the value of the Ordinary Shares at the time of transfer. However, where Ordinary Shares being acquired are transferred directly to the Depositary's nominee, the only charge will generally be the higher charge of (pound)1.50 per (pound)100 (or part) of the price payable for the Ordinary Shares so acquired. The U.K. government has announced its intention to abolish both stamp duty and stamp duty reserve tax in respect of the transfer of securities from a date which has not yet been announced. 6. SELECTED FINANCIAL DATA The information required by this item is included in the 1996 Annual Report to Shareholders under the heading "Supplementary Financial Information -- Five Year Summary" on page 87 and is incorporated herein by reference. 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is included in the 1996 Annual Report to Shareholders under the heading "Financial Review" on pages 24 to 31 and is incorporated herein by reference. 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is included in the 1996 Annual Report to Shareholders under the heading "Financial Statements under U.S. GAAP" on pages 67 through 86 and is incorporated herein by reference. 59 62 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item with respect to executive officers is set forth in Part I under the caption "Executive Officers of the Registrant". The information required by this item with respect to directors is included in the Proxy Statement under the headings "Appointment of Directors" and "Compliance with Section 16(a) of the U.S. Securities Exchange Act of 1934" and is incorporated herein by reference. 11. EXECUTIVE COMPENSATION The information required by this item is included in the Proxy Statement under the heading "Executive Compensation" and is incorporated herein by reference. 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is included in the Proxy Statement under the headings "Security Ownership of Principal Shareholders" and "Security Ownership of Directors and Executive Officers" and is incorporated herein by reference. 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is included in the Proxy Statement under the heading "Certain Relationships and Related Transactions" and is incorporated herein by reference. PART IV 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 1. FINANCIAL STATEMENTS. Included in Part II, Item 8 of this report (by incorporation by reference to the 1996 Annual Report to Shareholders) are the following: Independent Auditors' Report Consolidated Statement of Operations for the years ended December 31, 1996, 1995 and 1994 60 63 Consolidated Balance Sheet at December 31, 1996 and 1995 Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1995 and 1994 Consolidated Statement of Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994 Notes to the Consolidated Financial Statements 2. FINANCIAL STATEMENT SCHEDULES. All schedules are omitted because the required information is not applicable or is included in the financial statements or related notes. 3. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. 3.1 -- Memorandum of Association of the Company. (Incorporated by reference to the Company's Registration Statement on Form 8-B, filed with the Securities and Exchange Commission on September 22, 1995, as amended). 3.2 -- Articles of Association of the Company. (Incorporated by reference to the Company's Registration Statement on Form 8-B, filed with the Securities and Exchange Commission on September 22, 1995, as amended). 4.1 -- Amended and Restated Deposit Agreement, dated as of November 30, 1994 (as amended as of October 2, 1995), among the Company, The Bank of New York, as Depositary, and the holders from time to time of American Depositary Receipts issued thereunder. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 4.2 -- Form of American Depositary Receipt (included in Exhibit 4.1). 4.3 -- Senior Debenture Indenture, dated as of October 3, 1995, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 4.4 -- Senior Discount Debenture Indenture, dated as of October 3, 1995, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996).
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4.5 -- Form of Senior Debenture (included in Exhibit 4.3). 4.6 -- Form of Senior Discount Debenture (included in Exhibit 4.4). 4.7 -- Deposit Agreement, dated as of October 3, 1995, between the Company and The Bank of New York, as Book-Entry Depositary. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.1 -- Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest, certain subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.2 -- Shareholders Agreement, entered into as of November 22, 1994, between certain subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.3 -- Registration Rights Agreement, dated October 3, 1995, among the Company, the TCI Affiliate, the U S WEST Affiliates, the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.4 -- Co-Operation Agreement, dated October 3, 1995, between the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.5 -- Share Dealing Agreement, dated October 3, 1995, among the TCI Affiliate, the U S WEST Affiliates, the Company and the SBC Affiliates. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.6 -- Tax Deed, dated November 22, 1994, between TCI International Holdings, Inc., U S WEST Holdings and Old Telewest. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.7 -- Trademark License Agreement, effective as of November 22, 1994, between Old Telewest and U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995).
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10.8 -- Tradename Agreement, effective as of November 22, 1994, between Old Telewest, TCI and TCI/U S WEST Cable Communications Group. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.9 -- Tax Deed, dated October 3, 1995, among the Company, the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.10 -- Consultant Agreement for Operational Assistance, dated July 17, 1992, among Birmingham Cable Corporation Limited ("BCCL"), Birmingham Cable Limited ("BCL") and Telewest Communications Group Limited ("Telewest CGL"). (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.11 -- Supplemental Agreement, dated April 8, 1994, relating to the Consultant Agreement referred to in Exhibit 10.5 (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.12 -- Management Agreement, dated April 25, 1990, among BCCL, BCL, U S WEST Holdings and Comcast Cablevision of Birmingham Inc. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.13 -- Assignment and Amendment Agreement, dated August 5, 1992, relating to the Management Agreement referred to in Exhibit 10.7 (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.14 -- Consultant Agreement, dated August 16, 1989, between Cable London plc and U S WEST Cable Communications Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
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10.15 -- Consultant Agreement for Technical Assistance, dated July 15, 1992, among Cable Corporation, Windsor Television Limited, Middlesex Cable Limited and Telewest CGL. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.16 -- Cable Affiliation Agreement, dated December 14, 1993, between Cable Programme Partners - Limited Partnership, Telewest CGL and other parties signatory thereto. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.17 -- Agreement, dated October 1, 1993, among Alan Stewart MacDonald Robinson, Jack Forrest Gill, Raman Subba Row Limited and TUCCI. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.18 -- Co-ownership Agreement, dated March 12, 1990, between U S WEST Holdings and Comcast Cablevision of Birmingham, Inc. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.19 -- Letter, dated April 29, 1992, relating to the Co-ownership Agreement referred to in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.20 -- Letter, dated November 27, 1992, relating to the Co-ownership Agreement referred to in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.21 -- Agreement to License and Provide Consulting Services, effective as of November 22, 1994, between Old Telewest and an affiliate of U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.22 -- Agreement, dated December 4, 1987, between United Cable Television Corporation on behalf of itself and United Artists Communications, Inc. and Trans-Global (U.K.) Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
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10.23 -- Agreement to License and Provide Consulting Services, effective as of November 22, 1994, between Old Telewest and TCI. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.24 -- Novation Agreement relating to Birmingham Cable, dated November 21, 1994, among General Cable, TUCCI, U S WEST Holding and other parties signatory thereto. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.25 -- Subscription and Shareholders Agreement, dated January 30, 1995, among Videotron Corporation Limited, United Artists Communications (London South) Limited, Cable London, Elt Acquisition Company Limited, Nynex CableComms Limited, Cable Corporation, London Interconnect Limited, Independent Cable Sales Limited, London Interconnect PPV Limited and London Interconnect Limited. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.26 -- Form of BT Interconnect Agreement, a copy of which was executed by BT and various of the Company's affiliated entites.* 10.27 -- Interconnection Agreement, dated July 15, 1994, between Mercury and United Artists Communications (Scotland) Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). ** 10.28 -- Mercury Marketing and Operations Agreement, dated August 10, 1993, between Telewest CGL and Mercury. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). ** 10.29 -- Letter Agreement, dated August 23, 1995, between SBCC and Mercury. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). ***
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10.30 -- Programming Agreement, dated June 30, 1995, among British Sky Broadcasting Limited, British Sky Broadcasting Group plc and Old Telewest. (Incorporated by reference to Old Telewest's Quarterly Report on Form 10-Q for the six months ended June 30, 1995).*** 10.31 -- General Purchasing Agreement, dated March 1, 1993, among Telewest CGL, various entities related to Telewest CGL, and Northern Telecom Europe Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).** 10.32 -- Purchase Agreement, dated August 27, 1993, between Southwestern Bell International Holdings and GPT Limited. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.33 -- Network Services Center Agreement, dated May 16, 1994, among Telewest CGL, BCCL, Cable London, and certain other signatories thereto. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.34 -- The Old Telewest Restricted Share Scheme. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.35 -- The Telewest 1995 Restricted Share Scheme. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.36 -- The Old Telewest Sharesave Scheme. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.37 -- The Telewest 1995 Sharesave Scheme. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.38 -- The Old Telewest Executive Share Option Scheme No. 1. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.39 -- The Telewest 1995 Executive Share Option Scheme No. 1. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended).
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10.40 -- The Old Telewest Executive Share Option Scheme No. 2. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.41 -- The Telewest 1995 Executive Share Option Scheme No. 2. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.42 -- The Old Telewest Share Participation Scheme. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.43 -- The Telewest 1995 Share Participation Scheme. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.44 -- Executive Secondment Agreement, dated November 21, 1994, between U S WEST Overseas and Telewest CGL (identical agreements were entered into between an affiliate of TCI and Telewest CGL). (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.45 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company and the SBC Affiliates. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.46 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company and the Cox Affiliate. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.47 -- Employment Agreement, dated November 21, 1994, between Alan Michels and Telewest CGL. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.48 -- Letter dated December 23, 1996, between Alan Michels and Telewest CGL.*
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10.49 -- Employment Agreement, dated November 21, 1994, between Stephen J. Davidson and Telewest CGL. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.50 -- Employment Agreement, effective December 1, 1992, between Lynn C. Rexroth and U S WEST Overseas Operations, Inc. ("U S WEST Overseas"). (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.51 -- Letter of Understanding, dated January 10, 1996, between Lynn C. Rexroth and U S WEST Overseas. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.51.1 -- Addendum to the Letters of Understanding, dated August 28, 1996, between Lynn C. Rexroth and U S WEST Overseas.* 10.52 -- Employment Agreement, dated May 6, 1994, between Simeon Galpert and Telewest CGL. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.53 -- Employment Agreement, dated March 7, 1996, between Roger Wilson and Telewest CGL. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.54 -- Employment Agreement, dated February 16, 1996, between Bruce Langham and the Telewest CGL.* 10.55 -- Letter Agreement, dated September 30, 1996, between Bruce Langham and Telewest CGL.* 10.56 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the Company and Anthony W.P. Stenham. * 10.57 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the Company and Sir Gordon Borrie QC. * 10.58 -- Non-Executive Directors Appointment Letter, dated August 1, 1995, between the Company and Lord Griffiths of Fforestfach. *
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10.59 -- Loan Agreement, by and among Telewest Communications Networks Limited, as borrower, The Bank of New York, CIBC Wood Gundy plc, Chase Investment Bank Limited, NatWest Markets and The Toronto-Dominion Bank, as arrangers, and CIBC Wood Gundy plc, as agent and security trustee, dated as of May 22, 1996, as amended pursuant to an Amendment Agreement, dated as of May 31, 1996 and a Second Amendment Agreement, dated as of August 2, 1996. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the six months ended June 30, 1996). 13 -- The Company's 1996 Annual Report to Shareholders (only those portions of the Company's 1996 Annual Report specifically incorporated by reference herein shall be deemed filed by the Company herewith). * 21 -- List of Subsidiaries of the Company. * 27 -- Financial Data Schedule. * 99 -- Only those portions of the Company's 1997 Proxy Statement expressly incorporated by reference herein shall be deemed filed by the Company herewith.
_________________________ * Filed herewith ** Portions of this agreement have been accorded confidential treatment by the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. *** Portions of this agreement have been accorded confidential treatment by the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. (b) Reports on Form 8-K. None. 69 72 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. Telewest Communications plc By: /S/ STEPHEN J. DAVIDSON --------------------------- Name: Stephen J. Davidson Title: Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS THAT EACH INDIVIDUAL WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS STEPHEN J. DAVIDSON AND CHARLES BURDICK, AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN THIS REPORT AND ANY AND ALL AMENDMENTS TO THIS REPORT, AND TO FILE THE SAME WITH ALL EXHIBITS THERETO, AND ALL DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
Signature Title Date - --------- ----- ---- /S/ A. GARY AMES Director March 24, 1997 - ------------------------------------------------ A. Gary Ames / S/ JOHN H. ATTERBURY III Director March 24, 1997 - ------------------------------------------------ John H. Atterbury III
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Signature Title Date - --------- ----- ---- /S/ LORD BORRIE Director March 25, 1997 - ------------------------------------------------ Lord Borrie /S/ LORD GRIFFITHS OF FFORESTFACH Director March 25, 1997 - ------------------------------------------------ Lord Griffiths of Fforestfach /S/ CHARLES M. LILLIS Director March 25, 1997 - ------------------------------------------------ Charles M. Lillis Director - ------------------------------------------------ James O. Robbins /S/ ADAM N. SINGER Director March 25, 1997 - ------------------------------------------------ Adam N. Singer /S/ ANTHONY W.P. STENHAM Director March 24, 1997 - ------------------------------------------------ Anthony W. P. Stenham Director - ------------------------------------------------ Fred A. Vierra /S/ STEPHEN J. DAVIDSON Director and Chief Executive Officer March 25, 1997 - ------------------------------------------------ (Principal Executive Officer) Stephen J. Davidson /S/ CHARLES BURDICK Director and Chief Financial Officer March 25, 1997 - ------------------------------------------------ (Principal Financial and Accounting Officer) Charles Burdick
71 74 EXHIBIT INDEX -------------
Exhibits No. Description - ------------ ----------- 3.1 -- Memorandum of Association of the Company. (Incorporated by reference to the Company's Registration Statement on Form 8-B, filed with the Securities and Exchange Commission on September 22, 1995, as amended). 3.2 -- Articles of Association of the Company. (Incorporated by reference to the Company's Registration Statement on Form 8-B, filed with the Securities and Exchange Commission on September 22, 1995, as amended). 4.1 -- Amended and Restated Deposit Agreement, dated as of November 30, 1994 (as amended as of October 2, 1995), among the Company, The Bank of New York, as Depositary, and the holders from time to time of American Depositary Receipts issued thereunder. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 4.2 -- Form of American Depositary Receipt (included in Exhibit 4.1). 4.3 -- Senior Debenture Indenture, dated as of October 3, 1995, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 4.4 -- Senior Discount Debenture Indenture, dated as of October 3, 1995, between the Company and The Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996).
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4.5 -- Form of Senior Debenture (included in Exhibit 4.3). 4.6 -- Form of Senior Discount Debenture (included in Exhibit 4.4). 4.7 -- Deposit Agreement, dated as of October 3, 1995, between the Company and The Bank of New York, as Book-Entry Depositary. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.1 -- Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest, certain subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.2 -- Shareholders Agreement, entered into as of November 22, 1994, between certain subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.3 -- Registration Rights Agreement, dated October 3, 1995, among the Company, the TCI Affiliate, the U S WEST Affiliates, the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.4 -- Co-Operation Agreement, dated October 3, 1995, between the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.5 -- Share Dealing Agreement, dated October 3, 1995, among the TCI Affiliate, the U S WEST Affiliates, the Company and the SBC Affiliates. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.6 -- Tax Deed, dated November 22, 1994, between TCI International Holdings, Inc., U S WEST Holdings and Old Telewest. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.7 -- Trademark License Agreement, effective as of November 22, 1994, between Old Telewest and U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995).
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10.8 -- Tradename Agreement, effective as of November 22, 1994, between Old Telewest, TCI and TCI/U S WEST Cable Communications Group. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.9 -- Tax Deed, dated October 3, 1995, among the Company, the SBC Affiliates and the Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.10 -- Consultant Agreement for Operational Assistance, dated July 17, 1992, among Birmingham Cable Corporation Limited ("BCCL"), Birmingham Cable Limited ("BCL") and Telewest Communications Group Limited ("Telewest CGL"). (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.11 -- Supplemental Agreement, dated April 8, 1994, relating to the Consultant Agreement referred to in Exhibit 10.5 (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.12 -- Management Agreement, dated April 25, 1990, among BCCL, BCL, U S WEST Holdings and Comcast Cablevision of Birmingham Inc. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.13 -- Assignment and Amendment Agreement, dated August 5, 1992, relating to the Management Agreement referred to in Exhibit 10.7 (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.14 -- Consultant Agreement, dated August 16, 1989, between Cable London plc and U S WEST Cable Communications Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
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10.15 -- Consultant Agreement for Technical Assistance, dated July 15, 1992, among Cable Corporation, Windsor Television Limited, Middlesex Cable Limited and Telewest CGL. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.16 -- Cable Affiliation Agreement, dated December 14, 1993, between Cable Programme Partners - Limited Partnership, Telewest CGL and other parties signatory thereto. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.17 -- Agreement, dated October 1, 1993, among Alan Stewart MacDonald Robinson, Jack Forrest Gill, Raman Subba Row Limited and TUCCI. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.18 -- Co-ownership Agreement, dated March 12, 1990, between U S WEST Holdings and Comcast Cablevision of Birmingham, Inc. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.19 -- Letter, dated April 29, 1992, relating to the Co-ownership Agreement referred to in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.20 -- Letter, dated November 27, 1992, relating to the Co-ownership Agreement referred to in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.21 -- Agreement to License and Provide Consulting Services, effective as of November 22, 1994, between Old Telewest and an affiliate of U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.22 -- Agreement, dated December 4, 1987, between United Cable Television Corporation on behalf of itself and United Artists Communications, Inc. and Trans-Global (U.K.) Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
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10.23 -- Agreement to License and Provide Consulting Services, effective as of November 22, 1994, between Old Telewest and TCI. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.24 -- Novation Agreement relating to Birmingham Cable, dated November 21, 1994, among General Cable, TUCCI, U S WEST Holding and other parties signatory thereto. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.25 -- Subscription and Shareholders Agreement, dated January 30, 1995, among Videotron Corporation Limited, United Artists Communications (London South) Limited, Cable London, Elt Acquisition Company Limited, Nynex CableComms Limited, Cable Corporation, London Interconnect Limited, Independent Cable Sales Limited, London Interconnect PPV Limited and London Interconnect Limited. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.26 -- Form of BT Interconnect Agreement, a copy of which was executed by BT and various of the Company's affiliated entites.* 10.27 -- Interconnection Agreement, dated July 15, 1994, between Mercury and United Artists Communications (Scotland) Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). ** 10.28 -- Mercury Marketing and Operations Agreement, dated August 10, 1993, between Telewest CGL and Mercury. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). ** 10.29 -- Letter Agreement, dated August 23, 1995, between SBCC and Mercury. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). ***
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10.30 -- Programming Agreement, dated June 30, 1995, among British Sky Broadcasting Limited, British Sky Broadcasting Group plc and Old Telewest. (Incorporated by reference to Old Telewest's Quarterly Report on Form 10-Q for the six months ended June 30, 1995).*** 10.31 -- General Purchasing Agreement, dated March 1, 1993, among Telewest CGL, various entities related to Telewest CGL, and Northern Telecom Europe Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).** 10.32 -- Purchase Agreement, dated August 27, 1993, between Southwestern Bell International Holdings and GPT Limited. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.33 -- Network Services Center Agreement, dated May 16, 1994, among Telewest CGL, BCCL, Cable London, and certain other signatories thereto. (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.34 -- The Old Telewest Restricted Share Scheme. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.35 -- The Telewest 1995 Restricted Share Scheme. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.36 -- The Old Telewest Sharesave Scheme. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.37 -- The Telewest 1995 Sharesave Scheme. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.38 -- The Old Telewest Executive Share Option Scheme No. 1. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.39 -- The Telewest 1995 Executive Share Option Scheme No. 1. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended).
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10.40 -- The Old Telewest Executive Share Option Scheme No. 2. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.41 -- The Telewest 1995 Executive Share Option Scheme No. 2. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.42 -- The Old Telewest Share Participation Scheme. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.43 -- The Telewest 1995 Share Participation Scheme. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.44 -- Executive Secondment Agreement, dated November 21, 1994, between U S WEST Overseas and Telewest CGL (identical agreements were entered into between an affiliate of TCI and Telewest CGL). (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.45 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company and the SBC Affiliates. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.46 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company and the Cox Affiliate. (Incorporated by reference to the Company's Registration Statement on Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as amended). 10.47 -- Employment Agreement, dated November 21, 1994, between Alan Michels and Telewest CGL. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.48 -- Letter dated December 23, 1996, between Alan Michels and Telewest CGL.*
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10.49 -- Employment Agreement, dated November 21, 1994, between Stephen J. Davidson and Telewest CGL. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1995). 10.50 -- Employment Agreement, effective December 1, 1992, between Lynn C. Rexroth and U S WEST Overseas Operations, Inc. ("U S WEST Overseas"). (Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)). 10.51 -- Letter of Understanding, dated January 10, 1996, between Lynn C. Rexroth and U S WEST Overseas. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.51.1 -- Addendum to the Letters of Understanding, dated August 28, 1996, between Lynn C. Rexroth and U S WEST Overseas.* 10.52 -- Employment Agreement, dated May 6, 1994, between Simeon Galpert and Telewest CGL. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.53 -- Employment Agreement, dated March 7, 1996, between Roger Wilson and Telewest CGL. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 1996). 10.54 -- Employment Agreement, dated February 16, 1996, between Bruce Langham and the Telewest CGL.* 10.55 -- Letter Agreement, dated September 30, 1996, between Bruce Langham and Telewest CGL.* 10.56 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the Company and Anthony W.P. Stenham. * 10.57 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the Company and Sir Gordon Borrie QC. * 10.58 -- Non-Executive Directors Appointment Letter, dated August 1, 1995, between the Company and Lord Griffiths of Fforestfach. *
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10.59 -- Loan Agreement, by and among Telewest Communications Networks Limited, as borrower, The Bank of New York, CIBC Wood Gundy plc, Chase Investment Bank Limited, NatWest Markets and The Toronto-Dominion Bank, as arrangers, and CIBC Wood Gundy plc, as agent and security trustee, dated as of May 22, 1996, as amended pursuant to an Amendment Agreement, dated as of May 31, 1996 and a Second Amendment Agreement, dated as of August 2, 1996. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the six months ended June 30, 1996). 13 -- The Company's 1996 Annual Report to Shareholders (only those portions of the Company's 1996 Annual Report specifically incorporated by reference herein shall be deemed filed by the Company herewith). * 21 -- List of Subsidiaries of the Company. * 27 -- Financial Data Schedule. * 99 -- Only those portions of the Company's 1997 Proxy Statement expressly incorporated by reference herein shall be deemed filed by the Company herewith.
_________________________ * Filed herewith ** Portions of this agreement have been accorded confidential treatment by the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. *** Portions of this agreement have been accorded confidential treatment by the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 80 EX-10.26 2 FORM OF BT INTERCONNECT AGREEMENT 1 EXHIBIT 10.26 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- DATED # 1996 STANDARD INTERCONNECT AGREEMENT BETWEEN #[OPERATOR] AND BRITISH TELECOMMUNICATIONS PLC PAGE 1 of 61 2 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- INDEX 1 Definitions and Interpretation 2 Commencement and Duration 3 Interconnection and Standards 4 System Alteration 5 Scope 6 Quality of Service 7 Transfer Charge Calls 8 New Services 9 Forecasts and Capacity 10 Provision of Information 11 CLI 12 BT Services 13 Operator Services 14 Charges and Payment 15 Billing 16 System Protection and Safety 17 Approved Attachments and Customer Equipment 18 Numbering 19 Review 20 Determination 21 Confidentiality 22 Force Majeure 23 Limitation of Liability 24 Intellectual Property Rights 25 Assignment 26 Disputes 27 Breach, Suspension and Termination 28 Notices 29 Entire Agreement 30 Variations 31 Waiver 32 Restrictive Trade Practices 33 Independent Contractors and Agency 34 Severability 35 Governing Law PAGE 2 of 61 3 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- SPECIFICATIONS Generic Electrical & Physical Interface Specification Generic C7 Signalling Interface Specification Generic Transmission Interface Specification Generic SDH Interface Specification ANNEXES Annex A Planning and Operations Annex B Billing and Payment Annex C Schedules Annex D Definitions PAGE 3 of 61 4 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- THIS AGREEMENT is made the # day of #[month] 1996 between #[Operator] registered in England No. #[number] having its registered office at #[address] and BRITISH TELECOMMUNICATIONS PUBLIC LIMITED COMPANY registered in England No. 1800000 having its registered office at 81 Newgate Street, London, EC1A 7AJ. WHEREAS A A licence was granted to the Operator on #[date] under section 7 of the Telecommunications Act 1984 to run the Operator System. B A licence was granted to British Telecommunications on 22 June 1984 under section 7 of the Telecommunications Act 1984 to run its telecommunication system and pursuant to paragraph 20 of schedule 5 to such Act such licence has effect as if granted to BT to run the BT System. C The Parties have agreed to connect the Operator System to the BT System and to the supply of services and facilities, on the terms and conditions of this Agreement. IT IS AGREED as follows: 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, except if the context requires otherwise, words and expressions are as defined in Annex D. 1.2 The Interpretation Act 1978 shall apply for the purpose of interpreting this Agreement as if this Agreement were an Act of Parliament. 1.3 The following documents form part of this Agreement and, in the event of any inconsistencies between them, the order of precedence shall (unless expressly stated to the contrary) be as follows: 1. main body of this Agreement 2. Annex D 3. Annexes A and B 4. Specifications 5. Annex C 6. Carrier Price List PAGE 4 of 61 5 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 1.4 It is hereby expressly agreed that the Manuals, the Technical Master Plan and the Customer Service Plan are not legally binding. 2. COMMENCEMENT AND DURATION 2.1 This Agreement takes effect on the date hereof and shall continue until: 2.1.1 either Party ceases to hold a licence granted to it pursuant to section 7 of the Act to run a Telecommunication System; or 2.1.2 termination pursuant to this Agreement. 2.2 A Party may terminate this Agreement by giving at any time to the other not less than 24 months' written notice to terminate. 2.3 After a notice has been given pursuant to paragraph 2.2 a Party may request the other Party to carry on good faith negotiations with a view to entering into a new agreement. 2.4 Following a request pursuant to paragraph 2.3, if, on termination of this Agreement either Party would be obliged under its Licence to enter into a new interconnection agreement with the other Party then the Parties shall carry on good faith negotiations with a view to entering into a new agreement to take effect on termination of this Agreement. 3. INTERCONNECTION AND STANDARDS 3.1 The Parties shall connect and keep connected the BT System and the Operator System at Points of Connection using Customer Sited Interconnect or In-span Interconnect in accordance with this Agreement (to such extent permitted by the Operator Licence). 3.2 If this Agreement does not contain a Schedule for the joint provision by the Parties of In-span Interconnect and BT notifies the Operator that BT requires Capacity between particular Switch Connections on a particular date, the Operator shall include such Capacity in its next Capacity Profile. The Operator shall place a Capacity Order in a timely manner for such Capacity by way of Customer Sited Interconnect between the same Switch Connections, being an order for not less than the Capacity required by BT. No such Capacity Order shall be cancelled nor any resulting Interconnect Link rearranged by the Operator without BT's written consent. The provisions relating to payment for duct for such Interconnect Links shall not apply and the Capacity by way of Customer Sited Interconnect provided pursuant to this paragraph shall, unless otherwise agreed, be used solely for Traffic Types for which BT has responsibility pursuant to Annex A. PAGE 5 of 61 6 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.3 Each Party shall comply with the Specifications in so far as they apply to the provision of services pursuant to this Agreement. 3.4 In the practical implementation of the Specifications relating to the interconnection of the BT System and the Operator System the Parties shall apply standards and operating guidelines which in the first instance have due regard to the following in the order of precedence specified below: 3.4.1 any legal requirements imposed upon each of them including requirements arising from Condition 13B of the BT Licence and the equivalent Condition of the Operator Licence; and 3.4.2 any relevant specification notified by the Director General in implementation of the recommendations of the NICC; and 3.4.3 any recommendations by ETSI; and 3.4.4 any recommendations by ITU-T; and 3.4.5 the GSM memorandum of understanding (where applicable) 4. SYSTEM ALTERATION 4.1 A Party wishing to make a System Alteration shall give to the other Party not less than 7 months written notice prior to the date of the anticipated System Alteration. The notice shall specify the technical details of the System Alteration and the date of the anticipated System Alteration. Following such notification each Party shall supply to the other such information as the other may reasonably request including in the case of the Party giving the notice, to the extent reasonably practicable, the potential impact on the other Party's System. 4.2 The Party receiving the notice pursuant to paragraph 4.1 shall notify the other as soon as practicable, but in any event not more than one month after receipt of such notice, of any alterations required to that Party's System as a result of the proposed System Alteration and, if the provisions in paragraph 4.6 do not apply, a quotation for the cost of such alterations calculated on the basis of the minimum cost consistent with good engineering practice. 4.3 If the Party giving the notice pursuant to paragraph 4.1 agrees the alterations required to the other Party's System and agrees the quotation (if any), the Parties shall agree a plan within three months of receipt of the notice referred to in paragraph 4.2 to implement the System Alteration and the other Party shall carry out such alterations in accordance with the agreed plan. PAGE 6 of 61 7 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.4 If the provisions in paragraph 4.6 do not apply, and if the Party giving the notice pursuant to paragraph 4.1 does not agree the alterations required and/or the quotation (if any), that Party shall so notify the other Party, and the Parties agree to treat the matter as a Dispute. The Party giving the notice pursuant to paragraph 4.1 shall not implement the relevant System Alteration until the Dispute is resolved. 4.5 On completion of the relevant alteration the Party receiving the notice pursuant to paragraph 4.1 shall invoice the other Party for such alteration for an amount not exceeding the agreed quotation. 4.6 Each Party shall pay its own costs arising out of the System Alteration if: 4.6.1 the Parties agree in writing to change their respective Systems for their mutual benefit; or 4.6.2 the System Alteration is lawfully directed by the Director General who also lawfully directs each Party to pay its own costs; or 4.6.3 the System Alteration is unanimously agreed by NICC; or 4.6.4 the altering Party is BT and the System Alteration is a change to the signalling system, which change is consistent with an upgrade path agreed by NICC. 4.7 The Parties shall amend the Specifications prior to a System Alteration. 4.8 If a Party makes a System Alteration it shall ensure that Calls handed over from the other Party are not prevented to any greater extent or hindered in any manner different from the generality of Calls made by the altering Party's Customers. 5. SCOPE 5.1 The Parties shall convey Calls and provide the services and facilities pursuant to the Schedules. 5.2 For the avoidance of doubt and notwithstanding the interconnection of the BT System and the Operator System neither Party shall hand over to the other Party, nor have an obligation to convey Calls of any category, unless the other Party has agreed to convey Calls of that category and there is express provision to convey Calls of that category in a Schedule. 5.3 Neither Party shall be obliged to provide or be entitled to access Ancillary Services unless there is express provision for the particular Ancillary Service in a Schedule. PAGE 7 of 61 8 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 6. QUALITY OF SERVICE 6.1 BT shall use reasonable endeavours to meet the Target Performance, applicable at the time of provision of the relevant Standard Service, specified in the Quality Schedule. 7. TRANSFER CHARGE CALLS 7.1 If having been allocated an entire NNG the Operator has the exclusive use of that NNG and requests BT not to offer Transfer Charge Calls to Operator Customers on such NNG then subject to the Operator: 7.1.1 taking reasonable steps to ensure that Operator Customers on such NNGs do not accept or agree to pay for Transfer Charge Calls; and 7.1.2 giving BT written notice that the Operator does not wish Transfer Charge Calls to be conveyed to the relevant NNG; BT shall instruct BT Operators not to make available Transfer Charge Calls to Operator Customers on such NNG, request operators of Authorised Overseas Systems not to make available Transfer Charge Calls to Operator Customers on such NNG, and request Third Parties who run Telecommunication Systems that provide public switched telephony within the United Kingdom pursuant to licences granted under the Act, other than licences available to classes of persons, not to make available Transfer Charge Calls to Operator Customers on such NNG. 7.2 If the Operator has complied with the provisions of paragraph 7.1, the Operator shall be released from any obligation to pay for Transfer Charge Calls conveyed to the relevant NNG 28 Working Days after the date of receipt of the notice pursuant to paragraph 7.1.2. 7.3 If BT releases the Operator from the obligation to pay for any Transfer Charge Call pursuant to paragraph 7.2, the Operator shall release BT from the obligation to pay the Operator for the conveyance of such Call unless the Call was connected by the BT Operator. 8. NEW SERVICES 8.1 Either Party may, at any time, request from the other Party an agreement to interconnect their respective Systems for the provision of any service or facility which the other Party provides under interconnection agreements to Third Party Operators which, in the case of a request to: 8.1.1 BT, is an agreement which BT is required to enter into under Condition 13 of the BT Licence; or PAGE 8 of 61 9 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 8.1.2 the Operator, is an agreement which the Operator is required to enter into under the equivalent Condition of the Operator Licence. 8.2 BT shall, following a request by the Operator, offer to enter into an agreement to interconnect the Parties' respective Systems for the provision of the service or facility to the Operator on BT's then current standard terms. Upon acceptance of such offer, this Agreement shall be amended by the addition of a Schedule containing the terms applicable to such service or facility or, if appropriate, the Parties shall agree and enter into a new interconnection agreement. 8.3 The Operator shall, following a request by BT, enter into good faith negotiations with BT to agree terms for interconnection of the Parties' respective Systems for the provision of the service or facility by the Operator to BT on fair and reasonable terms. Upon terms being agreed, this Agreement shall be amended to give effect to the agreed terms or, if appropriate, the Parties shall agree and enter into a new interconnection agreement. 8.4 If a Party requests from the other Party an agreement for interconnection for the provision of a service or facility which is not made available by such other Party to Third Party Operators and such agreement is one which, if BT is the other Party, BT is required to enter into under Condition 13 of the BT Licence or, if the Operator is the other Party, the Operator is required to enter into under the equivalent Condition of the Operator Licence, the Parties shall enter into good faith negotiations to enter into an agreement for interconnection for the provision of such service or facility in accordance with paragraphs 8.5 - 8.9 (inclusive) or otherwise as the Parties may agree. 8.5 The Party requesting the other Party under paragraph 8.4 (the "Requesting Party") shall provide at the time of such request the other Party (the "Requested Party") with a written statement of its requirements addressing the matters contained in the New Services Manual. 8.6 Not later than 5 Working Days after receipt by the Requested Party of the statement of requirements, the Requested Party shall acknowledge such receipt in writing. 8.7 Not later than 30 calendar days after the acknowledgement under paragraph 8.6, the Requested Party shall confirm whether or not the statement of requirements is sufficient for the purpose and, if not, the Requested Party shall request and the Requesting Party shall provide such further clarification of the statement of requirements as the Requested Party may reasonably require. The Parties shall use their reasonable endeavours to ensure that the Requested Party shall be in a position to confirm the sufficiency of the statement of requirements (with clarification, if any) within such 30 calendar day period. PAGE 9 of 61 10 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 8.8 Subject to the Requested Party confirming the sufficiency of the Requesting Party's statement of requirements under paragraph 8.7, the Requested Party shall not later than: 8.8.1 60 calendar days after the acknowledgement under paragraph 8.6, confirm in writing to the Requesting Party whether it accepts an obligation to enter into an agreement to meet those requirements in accordance with the cost and other principles embodied in the Requested Party's Licence; and 8.8.2 if it does accept an obligation to do so, 75 calendar days after the acknowledgement under paragraph 8.6, endeavour to agree with the Requesting Party a plan which addresses: 8.8.2.1 the testing of the feasibility of the requirements and, if so feasible, the implementation of those requirements; 8.8.2.2 the terms and conditions, including price, applicable to the requirements; and 8.8.2.3 any other relevant matter. 8.9 If the Requested Party does not accept under paragraph 8.8.1 an obligation to meet the Requesting Party's requirements or the Requested Party does accept under paragraph 8.8.1 an obligation to meet the Requesting Party's requirements but the Parties fail to agree on any aspect of the plan within the timescale referred to in paragraph 8.8.2, then the Requesting Party without prejudice to its other rights and remedies may immediately request a determination from the Director General under the provisions of the Requested Party's Licence. 8.10 If the Requested Party does not accept under paragraph 8.8.1 an obligation to meet the Requesting Party's requirements, negotiations to agree terms for interconnection for the provision of the service or facility may nevertheless continue, whether by further clarification of the statement of requirements or otherwise and without prejudice to the Requesting Party's right to request a determination from the Director General as referred to in paragraph 8.9. 8.11 The provisions of this paragraph 8 are intended to establish a framework for the interconnection of the Parties' respective Systems for the provision of any service or facility not already agreed to be provided under this Agreement, but are not intended to prejudice the rights, liabilities and obligations of the Parties created by and under their Licences. 9. FORECASTS AND CAPACITY PAGE 10 of 61 11 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 9.1 The Parties shall supply to each other forecasts in accordance with Annex A and as may be required in a Schedule. 9.2 The Parties shall order and provide Capacity in accordance with Annex A and as may be required in a Schedule. 10. PROVISION OF INFORMATION 10.1 Each Party shall provide free of charge, one copy of the information specified in paragraph 10.3 of the main body and in paragraphs 3, 7 and 16 of Annex A, and such other information as is reasonably required from time to time by the other Party for interconnection of the Systems and the provision of services or facilities pursuant to this Agreement. 10.2 Each Party shall promptly supply to the other upon request details of services and facilities which it provides to its Customers to which paragraph 8 may apply. 10.3 Subject to a Party's obligations of confidentiality to a Third Party, a Party may request and the other Party shall provide information on protocols in use by that other Party which are required for interconnection, conveyance of Calls or the provision of services specified in this Agreement between the BT System and the Operator System if such other Party has relevant information and the provision of such information is necessary as a consequence of the absence of international standards. 10.4 Notwithstanding any provision of this Agreement a Party shall not be obliged to provide information which is subject to a confidentiality obligation to a Third Party unless such Third Party consents to such disclosure. 10.5 The Disclosing Party will use reasonable endeavours to ensure that information disclosed is correct to the best of its knowledge at the time of provision of such information. 10.6 If a Disclosing Party provides information to a Receiving Party, the Disclosing Party shall have obtained all appropriate Third Party consents. 10.7 Subject to paragraph 23, the Receiving Party shall indemnify the Disclosing Party and keep it indemnified against all liabilities, claims, demands, damages, costs and expenses arising as a consequence of any failure by the Receiving Party to comply with the conditions imposed and identified at the time when the information was provided. PAGE 11 of 61 12 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 10.8 Nothing in this Agreement shall require a Party to do anything in breach of any statutory or regulatory obligation of confidentiality, including without prejudice to the generality of the foregoing, any obligation pursuant to the Data Protection Act 1984, the BT Licence or the Operator Licence as appropriate or any code of practice on the confidentiality of customer information issued by the Director General. 11. CLI 11.1 If a Party's System requests CLI from the other System the originating System shall generate and convey CLI to the System requesting it to the extent that the originating System has such a capability. 11.2 A Party whose System receives CLI following a request pursuant to paragraph 11.1 shall only use the CLI for the following purposes: 11.2.1 routing Calls; and 11.2.2 compilation of inter Party bills; and 11.2.3 agreed administrative use in accordance with accepted industry practice from time to time which includes, at the date of this Agreement, call trace, malicious call identification, compilation of statistics relating to call origin and PRS Fraud prevention and detection; and 11.2.4 display to Customers subject to compliance with the "Code of Practice" as referred to in the definition of CLI in Annex D as such code may be amended or replaced from time to time. 11.3 A Party conveying Calls handed over from a Third Party System or an Authorised Overseas System shall convey, to the extent received, the CLI associated with those Calls. 11.4 Notwithstanding other provisions of this Agreement a Party may use CLI to pass telephone numbers to Emergency Organisations. 11.5 The cost of generating and conveying CLI is included in the relevant conveyance rates for Calls. Neither Party shall apply additional charges for CLI. PAGE 12 of 61 13 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 11.6 If a Party desires to charge separately for the generation or conveyance of CLI such Party may initiate a review of this paragraph 11 pursuant to paragraph 19.1.3 on 1 April 1997 and each 1 April thereafter. 11.7 If there is a change in applicable law or regulation materially affecting the operation of CLI, the Parties shall change the operation of CLI to the extent necessary to comply with the applicable law or regulation. 12 BT SERVICES 12.1 If, at the commencement of the Financial Year In Question, the Director General has not determined the Interim Charge for a Standard Service (other than a Competitive Standard Service), the Pre-Interim Charge for that Standard Service shall be the same as the Interim Charge (or the Actual Charge, if applicable, for the relevant period) for that Standard Service for the Financial Year immediately preceding the Financial Year In Question provided always that such Interim Charge has been determined for such immediately preceding Financial Year. 12.2 If, for the Financial Year In Question, the Director General has not determined, before 1 July of such year, the Interim Charge for a Standard Service (other than a Competitive Standard Service) referred to the Director General pursuant to Condition 16B.2 of the BT Licence, BT shall, as soon as reasonably practicable following publication in the Carrier Price List of the determined Interim Charge for the Financial Year In Question, adjust and recalculate the charges in respect of such Standard Service for the Financial Year In Question using the determined Interim Charge and calculate any sum overpaid or underpaid. 12.3 As soon as reasonably practicable following a determination by the Director General of a charge (or the means of calculating that charge) for a Standard Service, BT shall make any necessary alterations to the Carrier Price List so that it accords with the full list of Standard Services maintained by BT pursuant to Condition 16B.8 of the BT Licence and shall send a copy of the alterations to the Carrier Price List to the Operator as soon as reasonably practicable. 12.4 After the Director General has determined the Final Charge (or the means of calculating that charge) for a Standard Service, BT shall, as soon as reasonably practicable following publication in the Carrier Price List of the determined Final Charge for the Financial Year In Question, adjust and recalculate the charges in respect of such Standard Service for the Financial Year In Question in accordance with the provisions of Condition 13.5A.3B of the BT Licence and calculate the interest for any sums overpaid or underpaid in accordance with the Oftel Interest Rate. For the purposes of this paragraph 12.4 Pre-Interim Charges shall be treated as Interim Charges. PAGE 13 of 61 14 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 12.5 If the Director General determines that a Standard Service is a Competitive Standard Service, BT may, specify and vary from time to time, the charge for such Competitive Standard Service by publication in the Carrier Price List and such charge shall take effect on the Effective Date being a date not earlier than the date of such publication. If BT increases the price of a Competitive Standard Service the Effective Date shall in addition be not earlier than 28 calendar days after the date of such publication. 12.6 If a determination referred to in paragraphs 12.3, 12.4 or 12.5 is subject to a legal challenge, the Parties shall, without prejudice, treat the determination as valid until the conclusion of the legal proceedings, unless the court otherwise directs. If the court finds a determination to be unlawful then the Parties agree to revert to the charges payable immediately prior to such determination being made and BT shall make any necessary alterations to the Carrier Price List. As soon as reasonably practicable following a redetermination by the Director General (as a result of a legal challenge) of a charge (or the means of calculating that charge) for a Standard Service, BT shall make any necessary alterations to the Carrier Price List so that it accords with the full list of Standard Services maintained by BT pursuant to Condition 16B.8 of the BT Licence and shall send a copy of the alterations to the Carrier Price List to the Operator as soon as reasonably practicable. BT shall, as soon as reasonably practicable following publication in the Carrier Price List of the redetermined charge for the Financial Year In Question, adjust and recalculate the charges in respect of such Standard Service for the Financial Year In Question and calculate the interest for any sums overpaid or underpaid in accordance with the Oftel Interest Rate. 12.7 For a service which is not a Standard Service or is a Standard Service for which there is no determined charge, BT may, specify and vary from time to time, the charge for such a service by publication in the Carrier Price List and such charge shall take effect on the Effective Date being a date not earlier than the date of such publication. 12.8 Subject to paragraphs 12.9 and 12.10, the charge payable during the course of the relevant Financial Year In Question for each Standard Service, other than a Competitive Standard Service, shall be that specified in the column headed Interim Charge in the Carrier Price List for the relevant Financial Year In Question. 12.9 Subject to paragraph 12.10, the charge payable during the course of the relevant Financial Year In Question for each Standard Service, other than a Competitive Standard Service or a Standard Service for which there is no determined charge, in respect of a period for which there is no charge specified in the column headed Interim Charge, shall be that specified in the column headed Pre-Interim Charge in the Carrier Price List for the relevant Financial Year In Question. PAGE 14 of 61 15 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 12.10 The charge payable for each Standard Service, other than a Competitive Standard Service, in respect of a period for which a charge is specified in the column headed Actual Charge, shall be the charge specified in the column headed Actual Charge in the Carrier Price List for the said period for the relevant Financial Year In Question. 12.11 An adjustment and recalculation which is to be carried out using the Final Charge shall be based on the charge specified in the column headed Final Charge in the Carrier Price List for the relevant Financial Year In Question. 12.12 The charge payable for each Competitive Standard Service and a service which is not a Standard Service, shall be the charge specified from time to time in the column headed BT Charge in the Carrier Price List. 12.13 If there is a difference between a charge for a Standard Service (other than a Competitive Standard Service) specified in the Carrier Price List and a charge determined by the Director General, the charge determined by the Director General shall prevail. 12.14 All references to an entry in the Carrier Price List for Standard Services are references to the Carrier Price List relating to the Financial Year In Question. 12.15 The date of publication in the Carrier Price List shall be the date that BT first makes available or sends the Carrier Price List containing the relevant entries to a person other than BT. 13. OPERATOR SERVICES 13.1 As soon as reasonably practicable following agreement of a charge (or the means of calculating that charge) for a service provided by the Operator to BT, BT shall make any necessary alterations to the Carrier Price List so that it accords with that agreement and shall send a copy of the alterations to the Carrier Price List to the Operator as soon as reasonably practicable. 13.2 If the Parties have agreed on a provisional basis an Interim Charge for a service provided by the Operator to BT, such provisionally agreed charge shall be reviewed on: 13.2.1 a date agreed by the Parties; or 13.2.2 a date that a determination by the Director General of an Interim Charge for an equivalent service for the relevant Financial Year In Question is published; PAGE 15 of 61 16 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 13.2.3 a date that a determination by the Director General of a Final Charge for an equivalent service for the relevant Financial Year In Question is published; whichever is the earlier and any variation to the provisionally agreed charge shall take effect from the date of the original agreement. 13.3 In circumstances other than where Condition 13.5.(1)(i) of the BT Licence or the equivalent Condition of the Operator Licence applies, if the Parties are unable to reach agreement of a charge (or the means of calculating that charge) for a service provided by the Operator to BT under the Agreement, either Party may serve a review notice on the other Party under paragraph 19.1. 13.4 If the Director General has previously determined the charge for a service provided by the Operator to BT, and if, at the commencement of the Financial Year In Question, the Director General has not determined the Interim Charge for that service, the Pre-Interim Charge for that service shall be the same as the Interim Charge for that service for the Financial Year immediately preceding the Financial Year In Question provided always that such Interim Charge has been determined for such immediately preceding Financial Year. 13.5 If the Director General has previously determined the charge for a service provided by the Operator to BT, and if, for the Financial Year In Question, the Director General has not determined, before 1 July of such year, the Interim Charge for that service, the Operator shall, as soon as reasonably practicable following publication in the Carrier Price List of the determined Interim Charge for the Financial Year In Question, adjust and recalculate the charges in respect of that service for the Financial Year In Question using the determined Interim Charge and calculate any sum overpaid or underpaid. 13.6 As soon as reasonably practicable following a determination by the Director General of a charge (or the means of calculating that charge) for a service provided by the Operator to BT, BT shall make any necessary alterations to the Carrier Price List so that it accords with the determination and shall send a copy of the alterations to the Carrier Price List to the Operator as soon as reasonably practicable. 13.7 If the Director General has determined an Interim Charge for a service provided by the Operator to BT, after the Director General has determined the Final Charge (or the means of calculating that charge) for that service, the Operator shall, as soon as reasonably practicable following publication in the Carrier Price List of the determined Final Charge for the Financial Year In Question, adjust and recalculate the charges in respect of that service for the Financial Year In Question in accordance with the provisions of Condition 13.5B.1A of the BT Licence and calculate the interest for any PAGE 16 of 61 17 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- sums overpaid or underpaid calculated in accordance with the Oftel Interest Rate. For the purposes of this paragraph 13.7 Pre-Interim Charges shall be treated as Interim Charges. 13.8 If the Director General has determined an Interim Charge for a service provided by the Operator to BT then either Party may request the Director General to determine the Interim Charge for that service for the next Financial Year In Question. 13.9 If a determination referred to in paragraphs 13.3, 13.6, 13.7 or 13.8 is subject to a legal challenge, the Parties shall, without prejudice, treat the determination as valid until the conclusion of the legal proceedings unless the court otherwise directs. If the court finds a determination to be unlawful then the Parties agree to revert to the charges payable immediately prior to such determination being made and BT shall make any necessary alterations to the Carrier Price List. As soon as reasonably practicable following a redetermination by the Director General (as a result of a legal challenge) of a charge (or the means of calculating that charge) for such service, BT shall make any necessary alterations to the Carrier Price List so that it accords with redetermination and shall send a copy of the alterations to the Carrier Price List to the Operator as soon as reasonably practicable. The Operator shall, as soon as reasonably practicable following publication in the Carrier Price List of the redetermined charge for the Financial Year In Question, adjust and recalculate the charges in respect of such service for the Financial Year In Question and calculate the interest for any sums overpaid or underpaid in accordance with the Oftel Interest Rate. 13.10 Subject to paragraphs 13.11 and 13.12, the charge payable during the course of the relevant Financial Year In Question for each service provided by the Operator to BT, shall be that specified in the column headed Interim Charge in the Carrier Price List for the relevant Financial Year In Question. 13.11 The charge payable during the course of the relevant Financial Year In Question for each service provided by the Operator to BT for which there is no determined charge, in respect of a period for which there is no charge specified in the column headed Interim Charge, shall be that specified in the column headed Pre-Interim Charge in the Carrier Price List for the relevant Financial Year In Question. 13.12 An adjustment and recalculation which is to be carried out using the Final Charge shall be based on the charge specified in the column headed Final Charge in the Carrier Price List for the relevant Financial Year In Question. 13.13 If any charge (or the means of calculating that charge) for a service provided by the Operator to BT has retrospective effect then the Operator shall adjust and recalculate the charges in respect of such service for the Financial Year PAGE 17 of 61 18 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- In Question using the new charge and calculate the interest for any sum overpaid or underpaid at the Oftel Interest Rate. 13.14 If there is a difference between a charge for a service provided by the Operator to BT specified in the Carrier Price List and a charge determined by the Director General, the charge determined by the Director General shall prevail. 13.15 All references to an entry in the Carrier Price List for services provided by the Operator are references to the Carrier Price List relating to the Financial Year In Question. 13.16 The date of publication in the Carrier Price List shall be the date that BT first makes available or sends the Carrier Price List containing the relevant entries to a person other than BT. 14. CHARGES AND PAYMENT 14.1 Each Party shall pay the charges calculated in accordance with, and within the time specified in, this Agreement. 14.2 No charges shall be payable under this Agreement by one Party to the other unless such charges are specifically referred to in this Agreement. 14.3 The charges in this Agreement are exclusive of VAT unless such charges are stated to be inclusive of VAT. 14.4 Invoices are due and payable in pounds sterling. 14.5 Each Party shall pay the other Party the relevant charges specified in this Agreement for all Calls conveyed between the Parties except that if a Party has a Third Party Interconnect, and the other Party has a Third Party Interconnect Agreement containing provisions such that charges for Calls conveyed via the Third Party Interconnect are paid directly to that other Party by that Third Party, then the first Party shall be released from payment for such Calls subject to such Calls being conveyed in agreed separate Traffic Routes. 14.6 If an Operator has a liability to pay BT Access Deficit Contributions for Calls handed over directly to BT that liability shall continue notwithstanding that the Operator conveys such Calls to BT via a Third Party. 14.7 If the Operator hands over a Call to a Third Party Operator system and such Call is subsequently handed over to the BT System and conveyed to a BT Network Termination Point the Operator shall pay BT (in relation to such a Call) the same contribution to BT's Access Deficit as the Operator would PAGE 18 of 61 19 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- have been liable to pay BT if such a Call had been handed over directly from the Operator System to the BT System. 14.8 The Operator shall not pay any Access Deficit Contribution in respect of a Call made on or after 8 February 1996. 15. BILLING 15.1 Each Party shall provide to the other invoices of all amounts due to it, calculated in accordance with the provisions of Annex B and the Carrier Price List. 16. SYSTEM PROTECTION AND SAFETY 16.1 Each Party is responsible for the safe operation of its System and shall take all reasonable and necessary steps in its operation and implementation of this Agreement to ensure that its System does not: 16.1.1 endanger the safety or health of employees, contractors, agents or Customers of the other Party; or 16.1.2 damage, interfere with or cause any deterioration in the operation of the other Party's System. 17. APPROVED ATTACHMENTS AND CUSTOMER EQUIPMENT 17.1 Neither Party shall connect or knowingly permit the connection to its System of anything that is not approved by the relevant approvals authority for attachment to its System. 17.2 If a Customer ceases wholly or partly to be a Party's Customer at any one site and becomes a Customer of the other Party, the first Party shall not hinder the second Party from: 17.2.1 gaining access to equipment rooms owned or occupied by the Customer, 17.2.2 gaining access to ducting and wiring owned by the Customer, and/or 17.2.3 obtaining consents and wayleaves from any Third Party as shall be required for such access. 18. NUMBERING PAGE 19 of 61 20 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 18.1 Each Party shall use numbers in accordance with the United Kingdom national numbering scheme and shall comply with the numbering provisions in Annex A. 19. REVIEW 19.1 A Party may seek to amend this Agreement by serving on the other a review notice if: 19.1.1 either Party's Licence is materially modified (whether by amendment or replacement); or 19.1.2 a material change occurs in the law or regulations (including codes of practice whether or not having the force of law) governing telecommunications in the United Kingdom; or 19.1.3 this Agreement makes express provision for a review or the Parties agree in writing that there should be a review; or 19.1.4 a material change (including enforcement action by any regulatory authority) occurs which affects or reasonably could be expected to affect the commercial or technical basis of this Agreement; or 19.1.5 this Agreement is assigned or transferred by the other Party except if prior written consent to the assignment or transfer is not required under paragraph 25.1; or 19.1.6 there is a general review pursuant to paragraph 19.4; or 19.1.7 there is to be a review of charges for which a Review Date is specified in a Schedule. 19.2 A review notice shall set out in reasonable detail the issues to be discussed between the Parties. 19.3 Save as provided in paragraphs 19.4 or 19.5, a Party shall serve a review notice not later than the expiration of a 1 year period commencing on the date set opposite each paragraph as follows: ------------------------------------------------------------------------ PARAGRAPH PERIOD COMMENCING ON THE DATE: ------------------------------------------------------------------------ 19.1.1 of publication of the modifications to the Licence ------------------------------------------------------------------------ 19.1.2 of occurrence of material change ------------------------------------------------------------------------ PAGE 20 of 61 21 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ------------------------------------------------------------------------ 19.1.3 of entitlement or occurrence of the date of written agreement ------------------------------------------------------------------------ 19.1.4 of occurrence of the material change ------------------------------------------------------------------------ 19.1.5 of notification of assignment or transfer ------------------------------------------------------------------------ 19.4 A Party may initiate a general review of this Agreement by serving a review notice during the period of three months commencing on 1st April 1998 and 1st April every 2 years thereafter. 19.5 A Party may initiate a review of charges in a Schedule or the Carrier Price List if there is a Review Date specified, by serving a review notice during the period of three months commencing on the Review Date. 19.6 On service of a review notice, the Parties shall forthwith negotiate in good faith the matters to be resolved with a view to agreeing the relevant amendments to this Agreement. 19.7 A variation of charges payable by one Party to the other following a review notice pursuant to paragraph 19.1.7 shall take effect as of the Review Date. All other variations of charges resulting from a determination by the Director General shall, except where agreed otherwise, take effect from the date of the relevant review notice. 19.8 For the avoidance of doubt, the Parties agree that notwithstanding service of a review notice this Agreement shall remain in full force and effect. 20. DETERMINATION 20.1 If the Parties fail to reach agreement on the subject matter of a review notice within 3 months (or within 6 months for a review notice under paragraph 19.4) in each case from the date of service of such review notice, either Party may, not later than 3 months after the expiration of the relevant period, request in writing the Director General to determine: 20.1.1 the matters upon which the Parties have failed to agree; 20.1.2 whether this Agreement should be modified to take account of such matters; and, if so 20.1.3 the amendment or amendments to be made. PAGE 21 of 61 22 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- The Parties may, at any time, agree in writing a variation to the time periods specified above in relation to a particular review notice. 20.2 On receipt of a request for a determination the Director General may make a determination if he is satisfied that: 20.2.1 the requirements of the relevant paragraphs in paragraph 19.1 have been satisfied; and 20.2.2 the modifications sought to this Agreement are material. 20.3 A determination by the Director General shall be limited to: 20.3.1 the subject matter of the request for a determination; and 20.3.2 matters on which the Parties have failed to agree which the Director General would have power to determine under either Condition 13 of the BT Licence or under the equivalent Condition of the Operator Licence if there was no agreement between the Parties. 20.4 In making a determination, the Director General shall act pursuant to the criteria contained from time to time either in Condition 13 of the BT Licence or in the equivalent Condition of the Operator Licence. The Parties shall have the rights and remedies whether arising at law or otherwise in relation to such determination as would be available under either Condition 13 of the BT Licence or under the equivalent Condition of the Operator Licence. 20.5 The Parties shall enter into an agreement to modify or replace the Agreement in accordance with the Director General's determination unless the determination is subject to a legal challenge. 20.6 If the determination is subject to a legal challenge then the Parties shall subject to paragraphs 12.6 and 13.9 modify or replace the Agreement at the conclusion of the legal proceedings in accordance with the Director General's determination and the result of the legal proceedings. 20.7 For the avoidance of doubt, determination of a charge may include a determination of the basis for calculating that charge. 21. CONFIDENTIALITY 21.1 Subject to the following provisions of this paragraph 21, a Receiving Party shall keep in confidence Confidential Information and will not (and will use its reasonable endeavours to ensure that its directors, employees, and professional advisers will not) disclose such information to any Third Party. PAGE 22 of 61 23 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 21.2 A Receiving Party shall exercise no lesser degree of care of Confidential Information than would a reasonable person with knowledge of confidential nature of the information. A Receiving Party shall exercise no lesser security or degree of care than that Party applies to its own Confidential Information of an equivalent nature. 21.3 A Receiving Party shall restrict disclosure of Confidential Information relating to the other Party to those persons who have a reasonable need to know. Confidential Information shall be used solely for the purposes for which it was disclosed. 21.4 A Receiving Party may disclose Confidential Information to an Associated Company, subject to the Associated Company undertaking to comply with obligations equivalent to these contained in this paragraph 21. 21.5 A Receiving Party may disclose Confidential Information to a contractor or agent, subject to the contractor or agent undertaking to comply with obligations equivalent to those contained in this paragraph 21. 21.6 The following shall not constitute a breach of this paragraph 21: 21.6.1 a disclosure authorised in writing by the Disclosing Party to the extent of that authority; or 21.6.2 a disclosure to an Emergency Organisation; or 21.6.3 publication of all or part of this Agreement or details of it pursuant to the BT Licence or publication in the Carrier Price List or Quality Schedule except in so far as the Director General has consented to the exclusion of any matter pursuant to Condition 16A of the BT Licence; or 21.6.4 a disclosure which is properly made pursuant to the Operator Licence or the BT Licence or a relevant statutory or other regulatory obligation; or 21.6.5 a disclosure properly and reasonably made to the Director General under paragraph 20, to an arbitrator, expert or any person appointed by the Parties for the resolution of a Dispute; or 21.6.6 a disclosure to obtain or maintain any listing on any recognised stock exchange, subject to in the case of any disclosure specified in paragraphs 21.6.4 to 21.6.6 the Receiving Party informing the Disclosing Party as soon as reasonably practical, after such disclosure. PAGE 23 of 61 24 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 21.7 Unless otherwise agreed in writing, a Receiving Party shall not use the other Party's Confidential Information to provide commercial advantage to its retail business. 22. FORCE MAJEURE 22.1 Neither Party shall be liable for any breach of this Agreement caused by act of God, insurrection or civil disorder, war or military operations, national or local emergency, acts or omissions of government, highway authority or other competent authority, compliance with any statutory obligation, industrial disputes of any kind (whether or not involving BT's or the Operator's employees), fire, lightning, explosion, flood, subsidence, weather of exceptional severity, acts or omissions of persons for whom neither Party is responsible or any other cause whether similar or dissimilar outside its reasonable control and any such event or circumstance is a force majeure. 22.2 The Party initially affected by a force majeure shall promptly notify the other of the estimated extent and duration of its inability to perform or delay in performing its obligations ("force majeure notification"). 22.3 Upon cessation of the effects of the force majeure the Party initially affected by a force majeure shall promptly notify the other of such cessation. 22.4 If as a result of a force majeure, the performance by the Party initially affected of its obligations under this Agreement is affected, such Party shall, subject to the provisions of paragraph 22.6, perform those of its obligations not affected by a force majeure. In performing those of its obligations not affected by a force majeure, the Party initially affected by a force majeure shall deploy its resources such that (when taken together with other obligations to its Customers and Third Parties) there is no undue discrimination against the other Party. 22.5 To the extent that a Party is prevented as a result of a force majeure from providing all of the services or facilities to be provided under this Agreement, the other Party shall be released to the equivalent extent from its obligations to make payment for such services or facilities or complying with its obligations in relation thereto. 22.6 Following a force majeure notification and if the effects of such force majeure continue for: 22.6.1 a continuous period of not more than 6 months from the date of the force majeure notification (whether or not notice of cessation has been given pursuant to paragraph 22.3) any obligation outstanding shall be fulfilled by the Party initially affected by the force majeure as soon as reasonably possible after the effects of the force majeure have ended, PAGE 24 of 61 25 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- save to the extent that such fulfilment is no longer possible or is not required by the other Party; 22.6.2 a continuous period of 6 months or more from the date of the force majeure notification (and notice of cessation has not been given pursuant to paragraph 22.3), the Party receiving the force majeure notification shall be entitled (but not obliged) to terminate this Agreement by giving not less than 30 days written notice to the other Party, provided that such notice shall be deemed not to have been given if notice of cessation is received by the Party receiving the force majeure notification prior to the expiry of the 30 days notice. If this Agreement is not terminated in accordance with the provisions of this paragraph 22.6.2, any obligations outstanding shall be fulfilled by the Party initially affected by the force majeure as soon as reasonably possible after the effects of the force majeure have ended, save to the extent that such fulfilment is no longer possible or is not required by the other Party. 23. LIMITATION OF LIABILITY 23.1 Neither Party has an obligation of any kind to the other Party beyond the obligations to exercise the reasonable skill and care of a competent telecommunications operator in performing its obligations under this Agreement. 23.2 Subject to paragraph 23.4 if a Party is in breach of any of its obligations under this Agreement to the other Party (excluding obligations arising under this Agreement to pay moneys in the ordinary course of business), or otherwise (including liability for negligence or breach of statutory duty) such Party's liability to the other shall be limited to one million pounds sterling (Stg (pound)1,000,000) for any one event or series of connected events and two million pounds sterling (Stg (pound)2,000,000) for all events (connected or unconnected) in any period of 12 calendar months. 23.3 Neither Party excludes or restricts its liability for death or personal injury caused by its own negligence or liability arising under Part I of the Consumer Protection Act 1987. 23.4 Neither Party shall be liable to the other in contract, tort (including negligence or breach of statutory duty) or otherwise for loss (whether direct or indirect) of profits, business or anticipated savings, wasted expenditure or for any indirect or other consequential loss whatsoever arising in connection with the operation of this Agreement, howsoever caused. 23.5 Each provision of this paragraph 23 is a separate limitation applying and surviving even if one or more such provisions is inapplicable or held unreasonable in any circumstances. PAGE 25 of 61 26 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 23.6 The amounts specified in paragraph 23.2, as adjusted pursuant to this paragraph 23.6, shall be adjusted on each 1st April after the date of this Agreement by the percentage change in the retail price index (published in the General Index of Retail Prices (RPI) published by the Central Statistical Office (or any successor index)) for the month of September immediately preceding each 1st April compared with the RPI published in September in the previous year. 24. INTELLECTUAL PROPERTY RIGHTS 24.1 Except as expressly provided otherwise in this Agreement, Intellectual Property Rights shall remain the property of the Party creating or owning the same and nothing in this Agreement shall be deemed to confer any assignment or licence of the Intellectual Property Rights of one Party to the other Party. 25. ASSIGNMENT 25.1 Unless otherwise agreed in writing, and subject to paragraph 25.2, no rights, benefits or obligations under this Agreement may be assigned or transferred, in whole or in part, by a Party without the prior written consent of the other Party. 25.2 No consent is required under paragraph 25.1 for an assignment of rights, benefits or obligations under this Agreement (in whole or in part) to a successor to all or substantially all of the assigning Party's System or to an Associated Company provided that such successor or Associated Company shall have had a licence granted to it under section 7 of the Act to run the Telecommunication System of the assigning Party. 25.3 The assigning Party shall promptly give notice to the other Party of any assignment permitted to be made without the other Party's consent. No assignment shall be valid unless the assignee/successor agrees in writing to be bound by the provisions of this Agreement. 26. DISPUTES 26.1 If a Party ("the disputing Party") wishes to invoke the dispute procedure specified in this paragraph it shall as soon as reasonably practicable notify the other Party's liaison contact specified from time to time in the Customer Service Plan. The disputing Party shall include with such notice all relevant details including the nature and extent of the Dispute. 26.2 Following a notification under paragraph 26.1 the Parties shall consult in good faith to try to resolve the Dispute at level 1. If agreement is not reached at level 1 the Dispute may be escalated to level 2. If agreement is PAGE 26 of 61 27 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- not reached at level 2 the Dispute may be escalated to level 3. If a Party escalates a Dispute it shall record for the benefit of the next level all relevant details including what is agreed and what is not agreed concerning the Dispute. 26.3 The name of each Party's liaison contact and representatives at each level of consultation shall be as specified from time to time in the Customer Service Plan. No change to a liaison contact or representative shall be effective until it has been notified to the other Party. 26.4 The above procedures are without prejudice to any other rights and remedies that may be available in respect of any breach of any provision of this Agreement. 26.5 Nothing herein shall prevent a Party from: 26.5.1 seeking (including obtaining or implementing) interlocutory or other immediate relief; or 26.5.2 referring the Dispute to the Director General in accordance with any right (if any) either Party may have to request a determination or other appropriate steps for its resolution. 27. BREACH, SUSPENSION AND TERMINATION 27.1 If a Party's System adversely affects the normal operation of the other Party's System, or is a threat to any person's safety, the other Party may suspend, to the extent necessary, such of its obligations hereunder, and for such period as it may consider reasonable to ensure the normal operation of its System or reduce the threat to safety. 27.2 If a Party is in material breach of (including failure to pay a sum due under) this Agreement, the other Party may serve a written notice (the "breach notice") on the Party in breach specifying the breach and requiring it to be remedied within: 27.2.1 30 calendar days from the date of receipt of such breach notice; or 27.2.2 in case of emergency, within such shorter period as the Party not in breach may reasonably specify. 27.3 If, the Party in breach fails to remedy the breach within such period as may be specified by the Party not in breach pursuant to paragraph 27.2 the Party not in breach may, until such breach is remedied, suspend performance of such of its obligations under this Agreement as is reasonable in the circumstances. PAGE 27 of 61 28 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 27.4 If the Party in breach fails to remedy the breach within the period stated in the breach notice the Party not in breach may terminate this Agreement on three months' written notice provided always that if the Party in breach remedies the breach within such three months' notice period, this Agreement shall not terminate as a result of such notice. 27.5 This Agreement may be terminated by either Party by written notice forthwith (or on the termination of such other period as such notice may specify) if the other Party: 27.5.1 is unable to pay its debts within the meaning of section 123 (1) (e) of the Insolvency Act 1986; or 27.5.2 has a receiver or administrative receiver appointed in relation to all or any of its assets; or 27.5.3 has an order made or a resolution passed for its winding up (other than for the purpose of amalgamation or reconstruction); or 27.5.4 has an administration order made in respect of its business; or 27.5.5 enters into a voluntary arrangement under section 1 of the Insolvency Act 1986; or 27.5.6 ceases to carry on business. 27.6 Upon termination or expiry of this Agreement each Party shall take such steps and provide such facilities as are necessary for recovery by the other Party of equipment (if any) supplied by that other Party. Each Party shall use reasonable endeavours to recover equipment made available by it. 27.7 If 30 calendar days after the termination or expiry of this Agreement, a Party fails to recover equipment in good condition (fair wear and tear excepted) because of the acts or omissions of the other Party (or a Third Party appearing to have control of a site where such equipment is situate) the first Party may demand reasonable compensation from the other Party which shall be paid by the other Party within 10 calendar days of the date of the demand. 27.8 Without prejudice to a Party's rights upon termination or expiry of this Agreement, a Party shall refund to the other a fair and equitable proportion of those periodic sums (if any) paid under the Agreement for a period extending beyond the date of such termination or expiration. 27.9 Termination or expiry of this Agreement shall not be deemed a waiver of a breach of any term or condition of this Agreement and shall be without PAGE 28 of 61 29 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- prejudice to a Party's rights, liabilities or obligations that have accrued prior to such termination or expiry. 27.10 Notwithstanding the termination or expiry of this Agreement paragraphs 10.6, 17.2, 21, 23, 27.6 to 27.11 inclusive shall continue in full force and effect. 27.11 Each of the Parties' right to terminate or suspend performance of this Agreement pursuant to this paragraph 27 is without prejudice to any other rights or remedies available to either Party. 28. NOTICES 28.1 A notice shall be duly served if: 28.1.1 delivered by hand, at the time of actual delivery; 28.1.2 sent by facsimile, upon its receipt being confirmed; 28.1.3 sent by recorded delivery post, 4 calendar days after the day of posting. 28.2 Except if otherwise specifically provided all notices and other communications relating to this Agreement shall be in writing and shall be sent as follows: If to the Operator: #[Operator] If to BT: Contract Liaison Manager, #[Operator] PP # British Telecommunications plc Tenter House 45 Moorfields London EC2Y 9TH or to such other addresses as the Parties may notify from time to time pursuant to this paragraph 28. 29. ENTIRE AGREEMENT PAGE 29 of 61 30 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 29.1 This Agreement supersedes all previous understandings, commitments, agreements or representations whatsoever, whether oral or written, in relation to the subject matter of this Agreement. 30. VARIATIONS 30.1 Except as expressly provided in this Agreement, no variation of this Agreement shall be effective unless agreed in writing by the Parties and signed by a person nominated in writing on behalf of: 30.1.1 BT, by the director, UK Carrier Services (or his successor); and 30.1.2 the Operator, by a director or the company secretary (or equivalent office holder) of the Operator. 31. WAIVER 31.1 The waiver of any breach of, or failure to enforce, any term or condition of this Agreement shall not be construed as a waiver or a waiver of any other breach of the same or any other term or condition of this Agreement. No waiver shall be valid unless it is in writing and signed on behalf of the Party making the waiver. 32. RESTRICTIVE TRADE PRACTICES 32.1 Notwithstanding any other provision of this Agreement no provision of this Agreement, by virtue of which this Agreement is subject to registration (if such be the case) under the Restrictive Trade Practices Acts 1976 and 1977, shall take effect until the day after the date on which particulars of the Agreement have been furnished to the Director General of Fair Trading pursuant to the requirement of those Acts. In this paragraph the expression "this Agreement" includes any agreement or arrangement of which this Agreement forms part and which is registrable, or by virtue of which this Agreement is registrable, under those Acts. 33. INDEPENDENT CONTRACTORS AND AGENCY 33.1 Each of the Parties is and shall remain at all times an independent contractor fully responsible for its own acts or defaults (including those of its employees or agents). Neither Party is authorised and neither of the Parties nor their employees, agents or representatives shall at any time attempt to act or act on behalf of the other Party to bind the other Party in any manner whatsoever to any obligations. Neither Party nor its employees, agents or representatives shall engage in any acts which may lead any person to believe that such Party is an employee, agent or representative of the other Party. Nothing in this Agreement shall be deemed to constitute a partnership between the Parties. PAGE 30 of 61 31 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 33.2 If either Party appoints an agent for the purposes of this Agreement, and notifies the other Party, then the other Party shall deal with the appointed agent for such purposes until the first Party notifies the other Party that the appointment has been terminated. 34. SEVERABILITY 34.1 The invalidity or unenforceability of any provision of the Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement. 35. GOVERNING LAW 35.1 The interpretation, validity and performance of this Agreement shall be governed in all respects by the laws of England and Wales and the Parties submit to the exclusive jurisdiction of the English Courts. IN WITNESS WHEREOF THIS AGREEMENT was entered into the day and year first before written. SIGNED for and on behalf of #[OPERATOR] Signed: ______________________________________ Name: ________________________________________ Position: ____________________________________ SIGNED for and on behalf of BRITISH TELECOMMUNICATIONS plc Signed: ______________________________________ Name: ________________________________________ Position: ____________________________________ PAGE 31 of 61 32 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- [BT LOGO and GRAPHIC] GENERIC ELECTRICAL & PHYSICAL INTERFACE SPECIFICATION FOR CUSTOMER SITED INTERCONNECT I/C SPECIFICATION 0200 PAGE 32 of 61 33 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- GENERIC ELECTRICAL & PHYSICAL INTERFACE SPECIFICATION CONTENTS 1.GENERAL...................................................................................... 34 2. PHYSICAL INTERFACE.......................................................................... 34 3. ELECTRICAL INTERFACE........................................................................ 35 3.1. General Characteristics.......................................................... 35 3.2. Specifications at the output ports............................................... 35 3.3. Specifications at the input ports................................................ 35 3.4. Earthing of screen............................................................... 35 3.4.1. Output Ports.......................................................... 35 3.4.2. Input Ports........................................................... 35 3.5. Interference..................................................................... 35 3.6. Jitter........................................................................... 36 3.6.1. Maximum jitter at output ports........................................ 36 3.6.2. Tolerance of input ports to jitter and wander......................... 36 3.6.3. Measurement of Jitter................................................. 36 3.7. Wander at BT and Operator input ports............................................ 36 4. BT AND OPERATOR NETWORK SYNCHRONISATION..................................................... 36 4.1. General.......................................................................... 36 4.2. Synchronisation requirements for Master/Slave working............................ 39 4.3. Operator wishing to effect their own synchronisation............................. 39 5. FUNCTIONAL CHARACTERISTICS OF THE INTERFACE................................................. 39 5.1. Signalling....................................................................... 39 5.2. Timeslot '0'..................................................................... 40 5.3. Alarm Indication Signal (AIS).................................................... 40 5.4. Channel Time Slot Encoding....................................................... 40 6. SAFETY AND PROTECTION....................................................................... 40 6.1. Dangerous Voltages............................................................... 40 6.2. Radiation Hazards................................................................ 41 7. REFERENCES.................................................................................. 42 8. GLOSSARY.................................................................................... 42 9. HISTORY..................................................................................... 44
PAGE 33 of 61 34 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 1. GENERAL This document defines the physical and electrical characteristics of Customer Sited Interconnect links, between the BT System and the Operator System. All references to ITU Recommendations refer to the White Book unless otherwise indicated. 2. PHYSICAL INTERFACE The interconnection between the BT System and the Operator System shall be provided by a BT digital path that terminates on a BT Circuit Termination Unit (CTU) located within the building housing the Operator Switch. The BT CTU will present a G703 interface on two 75 ohm coaxial cables direct to either the Operator Switch or an Operator Digital Distribution Frame (DDF) which is co-located with the Operator Switch. The Point of Connection shall be the 75 ohm G703 coaxial connector at the BT end of the cables connecting the CTU to the Operator Switch (or co-located Operator DDF) (See Fig 1). The coaxial cables connecting the CTU to the Operator Switch shall have a loss not exceeding 6dB at 1024 kHz (see Fig 1). [FIGURE 1 GRAPHIC OMITTED] PAGE 34 of 61 35 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3. ELECTRICAL INTERFACE The following section shall apply to a 2Mbit/s interface using the coaxial pair option of ITU-T Recommendation G.703 (Physical/Electrical Characteristics of Hierarchical Digital Exchanges). 3.1. GENERAL CHARACTERISTICS These shall conform with section 6.1 of ITU-T Rec. G703 3.2. SPECIFICATIONS AT THE OUTPUT PORTS These shall conform with section 6.2 of ITU-T Rec. G.703 (Table 6). 3.3. SPECIFICATIONS AT THE INPUT PORTS These shall conform with section 6.3 of ITU-T Recommendation G.703. 3.4. EARTHING OF SCREEN 3.4.1.OUTPUT PORTS At output ports the cable screen shall be bonded to the equipment metalwork at the equipment boundary or as near as possible to it. 3.4.2.INPUT PORTS The input port cable screen shall be earthed via a capacitor (typically 0.1 (mu)F) to the equipment. Provision shall be also made at this point for providing a DC connection to earth. The equipment shall be set-up with the DC earth not connected, this is illustrated in figure 1. A suitable ferrite tube ferrule should be threaded onto the cable so as to be located at a point between the bonding point and the equipment circuitry 3.5. INTERFERENCE The input ports shall tolerate, without error, interference from a non synchronous standard test signal (ITU-T Recommendation 0.151- Error Performance Measuring Equipment for Digital Systems At The Primary Bit Rate and Above) at a level 18dB lower than the wanted signal. PAGE 35 of 61 36 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.6. JITTER 3.6.1. MAXIMUM JITTER AT OUTPUT PORTS Under worst case operating conditions (i.e. fault free) the output jitter shall not exceed 0.05 UI when measured in the frequency range 20 Hz to 100 kHz. Note: This assumes that the Operator Switch meets: 1. the input jitter tolerances given in section 3.6.2. 2. the jitter transfer function given in Figure 5 of ITU-T Recommendation Q.551 (Transmission Characteristics of Digital Exchanges). 3.6.2.TOLERANCE OF INPUT PORTS TO JITTER AND WANDER The tolerance of both the BT and the Operator input ports to jitter shall be as defined in section 3.1.1 of ITU-T Recommendation G.823 (Jitter And Wander Tolerance of Digital Input Ports). 3.6.3.MEASUREMENT OF JITTER A jitter measuring set conforming to the requirements of ITU-T Recommendation O.171 (Timing Jitter Measuring Equipment for Digital Systems) shall be used. BT and the Operator shall co-operate in the application of testing methods as described in ITU-T Recommendation G.823 (The Control of Jitter and Wander Within Digital Networks Which Are Based on the 2048 Kbit/s Hierarchy). 3.7. WANDER AT BT AND OPERATOR INPUT PORTS The tolerance of the BT and Operator input ports to wander shall be as defined in section 3.1.1 of ITU-T Recommendation G.823. 4. BT AND OPERATOR NETWORK SYNCHRONISATION 4.1. GENERAL The BT System employs a central master clock to maintain a co- operatively synchronised system within ITU-T recommended frequency limits. The synchronisation utilities that co-operate to establish the synchronous clock rate PAGE 36 of 61 37 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- are geographically located to ensure that any point in the BT System is contained within an 18 microsecond phase deviation (wander). The Operator System shall conform to the requirements listed below, which will ensure that Operator Switches are synchronised to the BT System. PAGE 37 of 61 38 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PAGE 38 of 61 39 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.2. SYNCHRONISATION REQUIREMENTS FOR MASTER/SLAVE WORKING The BT System and the Operator System shall function synchronously, in a master/slave relationship. To meet this requirement the Operator System shall take its timing from BT nominated 2 Mbit/s links carrying normal traffic between the BT and the Operator Switch Connections. The synchronisation from BT will be from the highest order timing source traceable to a G811 quality clock. If the Operator Switch is taking timing information from the BT System via a 2 Mbit/s link which fails (i.e. AIS is detected) then it must meet the following requirements: A. Switching to an alternative 2Mbit/s synchronisation link, if available. B. If no synchronisation links are available, entering holdover mode and keeping within the limits of holdover operation specified in section 2.2.3 of ITU-T Recommendation G.812 (Holdover Operation). 4.3. OPERATOR WISHING TO EFFECT THEIR OWN SYNCHRONISATION Timing information shall be exchanged between the BT System and the Operator System, for the purpose of minimising timing perturbations in general and slip rates in particular, drawing for guidance on the objective characteristics for the performance of digital clocks and of slip rate given in ITU-T recommendations G.811 and G.822. 5. FUNCTIONAL CHARACTERISTICS OF THE INTERFACE Functional characteristics of the 2 Mbit/s interface shall be in accordance with ITU-T Recommendations G.704 (Synchronous Frame Structures used at Primary and Secondary Hierarchical Levels) and G.706 (Frame Alignment and Cyclic Redundancy Check (CRC) Procedures Relating To Basic Frame Structures Defined In Rec. G704) with the following additions and clarification's: 5.1. SIGNALLING If Time Slot 16 is not required for signalling information, it must not be used as a traffic carrying channel within the BT System. Signalling across the interface is not specified in this document. PAGE 39 of 61 40 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.2. TIMESLOT '0' Chapter 2.3 of Rec. G.704 (Basic Frame Structure at 2048 Kbit/s) applies. Bits 4-7 in time slot zero not containing the frame alignment signal should be set to "1". The use of bit 8 for the return direction shall be determined by BT at each location. On some systems bit 8 will be set to "1" in the go and return direction. On other systems when BT detects one or more errors in the frame alignment word, this bit 8, in the return TSO "not" word, will be set at a "1" state on two successive occasions; when no errors are detected bit 8 will be set to the "0" state. If possible, the Operator Switch should make the same use of this bit 8, if not it should be tolerant to the sending of bit 8 in the return direction and set it to "0" in the go direction. 5.3. ALARM INDICATION SIGNAL (AIS) Under certain fault conditions AIS is used in the BT System. AIS is indicated by a continuous stream of binary 1's. When transmitted AIS is controlled by a free running 2048 kbit/s crystal oscillator (accuracy within +/- 50 ppm). The strategy for detecting the presence of AIS should be such that AIS is detectable, even in the presence of an error ratio of 1 in 1000. However, a signal with all bits except the frame alignment word in the '1'state, should not be mistaken as an AIS. 5.4. CHANNEL TIME SLOT ENCODING The 64 kbit/s channel time slots comprising the 2048 kbit/s stream shall carry 'A' law encoded information as defined in ITU-T Recommendation G.711 (Pulse Code Modulation (PCM) Of Voice Frequencies). The idle channel bit pattern transmitted over the Interconnect Link shall be compliant with ITU-T Recommendation Q.522 section 2.12 (Bit Patterns Generated By The Exchange In Idle Channel Time slots). 6. SAFETY AND PROTECTION 6.1. DANGEROUS VOLTAGES In order to protect personnel and equipment on both sides of a Point Of Connection, it is necessary to provide protection against the transmission of excessive voltage across the interface. PAGE 40 of 61 41 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Excessive voltages shall be as defined in BS 6301: 1989. For equipment which uses or generates excessive voltages the interface shall be electrically isolated from those voltages. Suitable devices are described in BS 6301: 1989. 6.2. RADIATION HAZARDS Where radio equipment is used, arrangements shall be made to protect all personnel from levels of radiation exceeding 1 milliwatt per square centimetre. PAGE 41 of 61 42 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7. REFERENCES ITU-T G.703 Physical/Electrical Characteristics of Hierarchical Digital Exchanges G.704 Synchronous Frame Structures used at Primary and Secondary Hierarchical Levels. G.706 Frame Alignment and Cyclic Redundancy Check (CRC) Procedures Relating To Basic Frame Structures Defined In Rec. G704 G.711 Pulse Code Modulation (PCM) Of Voice Frequencies. G.811 International Connections Terminating on Synchronous Network Nodes G.812 section 2.2.3 (Holdover Operation). G.823 The Control of Jitter and Wander Within Digital Networks Which Are Based on the 2048 KBIT/S Hierarchy G.823 section 3.1.1 Jitter And Wander Tolerance of Digital Input Ports O.151 Error Performance Measuring Equipment for Digital Systems At The Primary Bit Rate and Above O.171 Timing Jitter Measuring Equipment for Digital Systems Q.522 Section 2.12 Bit Patterns Generated By The Exchange In Idle Channel Time slots Q.551 Transmission Characteristics of Digital Exchanges BS6301 1989. Safety Requirements for Apparatus for Connection to British Telecommunication Networks 8. GLOSSARY (micron)F - Micro Farad (micron)s - Microsecond 2Mbit/s - 2048Kbit/s AIS - Alarm Indications Signal BS - British Standard CTU - Circuit Terminating Unit. dB - Decibel DC - Direct Current DDF - Digital Distribution Frame ITU-T - International Telecommunication Union - Telecommunications Kbit/s - KiloBits per second kHz - Kilo Hertz Mbit/s - Megabits per second ppm - Parts per million UI - Unit Interval PAGE 42 of 61 43 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 9. HISTORY Issue 1 January 1994 Issue 2 draft 1 June 1994 Issue 2 July 1994 Issue A August 1994 Issue B Sept 1994 Issue C January 1996 END OF SPECIFICATION BT Networks and Systems Interconnect Standards PP 311 Angel Centre 403 St John St London EC1V 4PL PAGE 43 of 61 44 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- [BT LOGO and GRAPHIC] GENERIC C7 SIGNALLING INTERFACE SPECIFICATION I/C SPECIFICATION 0300 PAGE 44 of 61 45 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- GENERIC C7 SIGNALLING INTERFACE SPECIFICATION 1. BACKGROUND The C7 signalling interface between BT and the Operator Systems shall be as defined in the Public Network Operator - Interconnect Standards Committee - (PNO-ISC) specifications of the Network Interfaces Co-ordination Committee - (NICC). ISC specifications 5 and 6 form the basis for the Generic C7 Signalling Interface Specification The Operator shall provide a compliance statement for each specification shown in the table below. The compliance statements shall be discussed by BT and the Operator and when agreed shall confirm that the Operator Exchange type and build is suitable for interconnection of the BT and Operator Systems. 2. REQUIREMENTS FOR COMPLIANCE STATEMENTS
----------------------------------------------------------------------------------------------------------- ISC SPECIFICATION DESCRIPTION COMPLIANCE STATEMENT REQUIREMENTS FROM OPERATOR ----------------------------------------------------------------------------------------------------------- ISC 5 Message Transfer Part (MTP) Define features relevant to Calls and services set out in this agreement. ----------------------------------------------------------------------------------------------------------- ISC 6 Section 2 and 3 IUP. Library of messages, codes Statement for Calls and services and common procedures ----------------------------------------------------------------------------------------------------------- ISC 6 Section 4 onwards IUP. Message sequence diagrams and Statement for Calls and services. descriptions for basic and supplementary services. -----------------------------------------------------------------------------------------------------------
Some ISC specifications await ratification by NICC. Prior to such ratification, ISC CPs and equivalent documents may be used (An example is PNO-ISC CP001). Once the ISC specifications are ratified by NICC they shall take precedence. 3. INTERCONNECT TO BT ISC The statements given above on C7 IUP also apply when an Operator interconnects to a BT ISC. For interconnect to a BT ISC using Telephony User PAGE 45 of 61 46 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Part - TUP the signalling interface shall comply with CCITT recs. Q.701 to Q.708, Q.723 and Q.724. 4. GLOSSARY NICC: The Network Interfaces Co-ordination Committee set up by OFTEL comprising members of industry for the purpose of advising the Director General on interfaces for interconnection between licensed operators. PNO-ISC: Public Network Operators - Interconnect Standards Committee. Secretariat:- Network Interfaces Co-ordination Committee ISC Secretariat Mercury House Waterside Park Longshot Lane Bracknell Berkshire CCITT: The International Telegraph and Telephone Consultative Committee is now succeeded by the ITU(T) and (R) International Telecommunications Union (Telecommunications) and (Radio). 5. HISTORY Issue 1.0 January 1994 Issue 1.1 February 1994 Issue 1.2 April 1994 Issue Issue A August 1994 Issue B August 1994 Issue C January 1996 BT Networks and Systems Interconnect Standards PP 311 Angel Centre 403 St John St London EC1V 4PL PAGE 46 of 61 47 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- [BT LOGO and GRAPHIC] GENERIC TRANSMISSION INTERFACE SPECIFICATION I/C SPECIFICATION 0100 PAGE 47 of 61 48 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- GENERIC TRANSMISSION INTERFACE SPECIFICATION CONTENTS:
1. GENERAL....................................................................................... 50 2. RESPONSIBILITIES.............................................................................. 50 3. RELEVANT PARAMETERS........................................................................... 51 4. OVERALL TRANSMISSION LOSS..................................................................... 51 4.1 Loudness Rating(LR).................................................................. 51 5. APPORTIONMENT OF OVERALL LOUDNESS RATING (OLR)................................................ 51 5.1 End to End Requirements.............................................................. 51 5.2 GSM/PCN Loudness Control............................................................. 52 5.3 RLR And Receive GSM Volume Control................................................... 52 6. TRANSMISSION TIME............................................................................. 52 6.1 Transmission Delays Within The Fixed Network - Without echo control.................................................................................. 52 6.2 Preferred Apportionment Of Transmission delay........................................ 53 6.3 Calls that involve an International Gateway.......................................... 53 6.4 Maximum delay under route failure conditions......................................... 53 6.5 Transmission Delays Within The Fixed Network - With echo control.................................................................................. 53 6.6 Transmission Delays Involving Digital Mobile/Wireless Access......................... 54 6.6.1 Transmission Delays Between Digital Mobile/wireless access and the Fixed Network - With echo control................................ 54 6.6.2 Transmission Delays Within Digital Mobile/wireless access Networks - With echo control............................................. 54 6.7 Transmission Delays On International Calls - With echo control....................... 54 7. ECHO LOSS..................................................................................... 54 7.1 GSM/PCN Echo Loss.................................................................... 56 7.2 Echo Control - International Conformance............................................. 56 7.3 Echo Control - GSM................................................................... 56 8. STABILITY LOSS................................................................................ 56 9. QUANTISING DISTORTION......................................................................... 57 9.1 Fixed Network Limits................................................................. 57 9.2 Mobile Network limits................................................................ 57 10. CODING STANDARDS.............................................................................. 57 11. NOISE......................................................................................... 58 12. ATTENUATION DISTORTION........................................................................ 58 13. GROUP DELAY DISTORTION........................................................................ 58 13.1 Sidetone Masking Rating - Normal Telephony Customer to BT PSTN..................................................................................... 58 13.2 Sidetone Masking Rating BT PSTN to GSM/PCN.......................................... 59 14. ERROR PERFORMANCE............................................................................. 59
PAGE 48 of 61 49 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 15. NON SPEECH LEVELS............................................................................. 59 16. GSM/PCN HEADSET AND HANDSET SENSITIVITY/FREQUENCY CHARACTERISTICS............................................................................... 59 17. REFERENCES.................................................................................... 60 18. HISTORY....................................................................................... 61
GENERAL This Specification sets out the transmission requirements and objectives to be met by BT and the Operator for the interconnection of the BT and Operator Systems. The requirements are based on the relevant International Telecommunications Union (ITU), European Telecommunications Standards Institute (ETSI) and Public Network Operator - Interest Group (PNO-IG) Recommendations. References to Global Systems Mobile / Personal Communications Networks (GSM/PCN) are based upon ETSI/ GSM recommendation. 3.5 phase 1. This recommendation is currently under review and will be updated to ETSI 300 540 GSM Phase 2. End to end requirements involve the performance of Customer equipment which is outside BT and the Operators controls. Customer networks as referred to throughout this document typically consist of at least one item of Customer Premises Equipment (CPE) situated beyond the Network Terminating Point (NTP). Where this Specification sets out matters that the Parties endeavour to agree, and agreement is not reached, such matters shall be disputes. RESPONSIBILITIES The responsibility for overall transmission quality is held by the Party selected by the Customer to carry the Call. If the Call is an indirect access Call then the indirect access Operator is responsible for the end to end quality of the Call. If the overall transmission quality for a Call cannot be met because either Party is unable to comply with the reasonable requests of the other Party, then neither Party will be obliged to convey the Call. - -------------------------------------------------------------------------------- PAGE 49 of 61 50 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- RELEVANT PARAMETERS Overall performance is affected by the following parameters: Overall loss Transmission Time (Absolute delay and propagation delay) Echo and Stability Quantising distortion Coding standards Attenuation distortion Group delay distortion Sidetone loss Crosstalk Errors Jitter and Wander BT and the Operator shall endeavour to achieve the requirements and objectives for overall loss, delay, echo loss, quantising distortion, and coding standards given in sections 4 to 10 inclusive. BT and the Operator shall each plan in accordance with the guidance given for the remaining parameters listed above. It should be noted that for some parameters the CPE may have a significant effect on the end to end performance. OVERALL TRANSMISSION LOSS LOUDNESS RATING (LR) The limits for overall loss expressed in terms of Loudness Ratings (LR) are defined in ITU-T Recommendation P. 76 (Blue book November 1989). APPORTIONMENT OF OVERALL LOUDNESS RATING (OLR) END TO END REQUIREMENTS BT and the Operator shall endeavour to: a) Provide connections which fall within the ITU-T G111 recommended OLR range of 8dB to 20dB for all analogue or mixed analogue/digital routings. For all digital routings the mean value for OLR shall be in the range 8dB to 12dB. b) avoid connections which exceed the ITU-T Recommended limiting OLR value of 29dB - -------------------------------------------------------------------------------- PAGE 50 of 61 51 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- C) minimise the range of different Transmission levels experienced by any one Customer. GSM/PCN LOUDNESS CONTROL Cellular network operators may utilise digital level control in the mobile switched network to control Send Loudness Rating (SLR) and Receive Loudness Rating (RLR). values. . RLR AND RECEIVE GSM VOLUME CONTROL The use of any Customer controlled receive volume control shall not decrease (i.e. make more sensitive) the RLR, by more than 10 dB for planning purposes. TRANSMISSION TIME TRANSMISSION DELAYS WITHIN THE FIXED NETWORK - WITHOUT ECHO CONTROL For UK Calls not employing echo control, the NTP - NTP one way delay shall be less than 13 ms for at least 95% (See (1)) of Calls. Assuming that Customer network delays at each end of the Call do not exceed 5 ms, then the total end to end delay shall be less than 23 ms. For the small proportion of Calls that exceed the 13ms limit, an absolute limit of 25ms excluding Customer networks shall be observed. Previous investigations have identified that customers may find such Calls to be unacceptable since Customer network delays could increase the end to end delay to over 30ms. - -------- (1) The 95% limits in 0, 0, 0, 0, 0 & 0 shall be implemented such that the possibility of individual Customers always encountering unacceptable performance is minimised. - -------------------------------------------------------------------------------- PAGE 51 of 61 52 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- PREFERRED APPORTIONMENT OF TRANSMISSION DELAY [GRAPHIC OMITTED] The apportionment principles presented in Figure 1 ensure that BT or Operator Customers experience acceptable levels of transmission delay. Any reapportionment of the segment boundaries (Collection, Transport and Delivery) shall be subject to joint agreement. CALLS THAT INVOLVE AN INTERNATIONAL GATEWAY For International Calls the one way delay from the NTP to the International Switching Centre (ISC) shall be no greater than 7 ms for 95% of Calls, with an absolute limit of 12 ms. MAXIMUM DELAY UNDER ROUTE FAILURE CONDITIONS. In situations where Calls have to be re-routed around failed sections of the BT or Operator Network, it is acceptable for the proportion of Calls meeting recommended delay limits to fall below 95%, however the absolute limits given above shall not be exceeded. TRANSMISSION DELAYS WITHIN THE FIXED NETWORK - WITH ECHO CONTROL Where echo control is provided over the fixed network, the one-way delay limit for at least 95% of national Calls shall be less than 125 ms. No Calls shall exceed the absolute one-way delay limit of 150 ms. - -------------------------------------------------------------------------------- PAGE 52 of 61 53 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- TRANSMISSION DELAYS INVOLVING DIGITAL MOBILE/WIRELESS ACCESS TRANSMISSION DELAYS BETWEEN DIGITAL MOBILE/WIRELESS ACCESS AND THE FIXED NETWORK - WITH ECHO CONTROL The one way delay limit for at least 95% of Calls between mobiles on digital networks or wireless access networks and the fixed network shall be less than 125 ms. No Calls shall exceed the absolute one-way delay limit of 150 ms. TRANSMISSION DELAYS WITHIN DIGITAL MOBILE/WIRELESS ACCESS NETWORKS - WITH ECHO CONTROL. The one way delay limit for at least 95% of Calls between mobiles on digital networks or wireless access networks within the UK shall be less than 215 ms. No connection shall exceed 230 ms one way delay. TRANSMISSION DELAYS ON INTERNATIONAL CALLS - WITH ECHO CONTROL. The maximum one way delay for an International Call using echo control will depend upon the nature of the destination network e.g. fixed, digital mobile or wireless access and the transmission media e.g. satellite or cable. International Calls using echo control should not exceed 400 ms, it is however recognised that under cable circuit failure/congestion conditions, satellite backup circuits may not meet this requirement. ECHO LOSS BT and the Operators shall seek to meet the design objective for echo loss (as defined in ITU-T Recommendation G122) presented at the Switch Connection with equal relative levels for both directions of transmission of 20dB, with no connections being less than 15dB for practical implementation. CPE connected via a 2-wire interface can have significant effect on echo losses. For planning purposes BT and the Operator shall assume that CPE will present an impedance of 600 ohms or the network shown in fig 5 of BS6305 at the 2 wire NTP. CPE and Customer networks are likely to determine the largest part of echo losses in the case of 4-wire connection to the BT and the Operator Systems. For planning purposes BT and the Operator shall assume that the CPE meets the 20dB echo loss objectives given in the Oftel Network Code of Practice (for the Design of Private Telecommunications Networks) - NCOP. - -------------------------------------------------------------------------------- PAGE 53 of 61 54 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- GSM/PCN ECHO LOSS The echo loss under operational conditions for a GSM/PCN based system shall be at least 46 dB referred to the Switch Connection with any Customer volume control set to its maximum output (i.e. loudest) position. ETSI/GSM 03.50/1 Section 3.4.1 provides further information related to echo loss. ITU-T Recommendation G165 provides guidance for the performance of echo control devices when switched into a connection. ITU-T Recommendations G151 and G473 refer. ECHO CONTROL - INTERNATIONAL CONFORMANCE Echo control devices for international connections to and from BT shall conform to ITU-T. Rec.G.165 on echo cancellers. ECHO CONTROL - GSM The GSM/PCN system shall provide echo protection as stated in ETSI/GSM 03.50/1 Section 3.4.2. STABILITY LOSS For International Calls and National Calls stability loss considerations shall be satisfied by the following requirement. The loss presented at the Switch Connection with equal relative levels for both directions of transmission shall not be less than 6dB at any frequency up to 4kHz. Account shall be taken of all conditions presented at the Switch Connection under normal operating conditions and any customer volume controls should be at maximum output. CPE connected via a 2-wire interface may have a significant effect on stability loss. For planning purposes BT and the Operator shall assume the CPE may present either open circuit or short circuit conditions at a 2-wire NTP. CPE and Customer networks are likely to largely determine the stability losses in the case of 4-wire connection to the BT and the Operator Systems. For planning purposes BT and the Operator shall assume that the CPE meets the 6dB stability loss requirement given in the NCOP. It is recognised by the Parties that stability losses of less than 6 dB could cause oscillation. - -------------------------------------------------------------------------------- PAGE 54 of 61 55 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- QUANTISING DISTORTION FIXED NETWORK LIMITS In order to meet international and UK requirements the following limits for quantising distortion units (qdu) shall be met: A1) Max end to end International 14 qdu B1) Public network collection (access network) 5 qdu C1) National transport/Trunk Network 0 qdu D1) Public network delivery (access network) 5 qdu MOBILE NETWORK LIMITS D2) Max end to end International 18 qdu A2) Collection (access network) 7 qdu B2) National transport/Trunk Network 0 qdu C2) Delivery (access network) 7 qdu For planning purposes BT and the Operator shall assume that Customer networks do not introduce more that 2 qdu. CODING STANDARDS At a digital interface it is a requirement that analogue information shall be encoded using the 8bit, A-law characteristic in accordance with ITU-T Recommendation G711 such that a 64kbit/s time slot at the Switch Connection can be decoded using a 8 bit, A-law decoder. - -------------------------------------------------------------------------------- PAGE 55 of 61 56 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- NOISE The limits for single tone or narrow band noise shall be more stringent than the limits for wideband noise to avoid Customer annoyance. As a general rule, the power in any individual tone should be 10dB less than the psophemetric noise power in the circuit (ITU-T Recommendation P11). The following ITU-T recommendations shall be complied with to give appropriate limits. Digital Exchanges - Recommendations Q.551 and Q.554 PCM line systems - Recommendation G.712 GSM/PCN systems - ETSI/GSM 3.50/1 section 3.2 The limits in Recommendation G.123 are of particular importance as they control the level of noise on International Calls. ATTENUATION DISTORTION In order to adequately control attenuation distortion each component of the connection shall have a suitable distortion limit. The following ITU-T Recommendations apply. Digital Exchanges - Recommendations Q.551 and Q.554 Digital Line Systems - Recommendation G.712 GROUP DELAY DISTORTION The following ITU-T Recommendations give suitable limits for the group delay distortion introduced by line transmission systems and coding processes in digital exchanges: Digital Exchanges - Recommendations Q.551 and Q.554 Digital Line Systems - Recommendation G.712 SIDETONE MASKING RATING - NORMAL TELEPHONY CUSTOMER TO BT PSTN. The Sidetone Masking Rating (STMR) for telephony CPE connected to a BT Network Terminating Point shall nominally be taken as 7 dB for planning purposes. - -------------------------------------------------------------------------------- PAGE 56 of 61 57 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- SIDETONE MASKING RATING BT PSTN TO GSM/PCN The Sidetone Masking Rating (STMR) for telephony CPE allowing users to gain access through the GSM system shall be nominally taken as outlined in ETSI/GSM 03.50/1 for STMR and LSTR. ERROR PERFORMANCE Error performance of digital networks is of key importance as it determines the end to end performance of both end to end digital services and analogue services supported by the BT and Operator Systems. The allocation principles of Recommendation G. 821 shall be used when determining the error for individual transmission systems. NON SPEECH LEVELS The use of any non-speech signals within an established Call, or during the phase of Call set-up or clear down, for such purposes as signalling (e.g. DTMF) shall comply with the principles set in Section 4 of BS6305 : 1992, that have been based upon a 0 dBr interface. Interfaces that are not taken as a 0 dBr point shall be planned as if they were a 0 dBr for purposes of realising interconnection between the BT System and a PCN/ GSM System. GSM/PCN HEADSET AND HANDSET SENSITIVITY/FREQUENCY CHARACTERISTICS The GSM/PCN system shall provide a performance in accordance with Section 3.8 of ETSI/GSM Recommendation 03.50/1. - -------------------------------------------------------------------------------- PAGE 57 of 61 58 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- REFERENCES ITU-T RECOMMENDATIONS G.111 Loudness Ratings in an International Connection G.122 Influence Of National Systems On Stability, Talker Echo and Listener Echo In International Connections G.123 Circuit Noise In National Circuits G.151 General performance objectives applicable to all modern Internat ional and National extension circuits. G165 Echo cancellers G473 Interconnect of a Maritime Mobile satellite system with the International automatic switched telephone service: Transmission aspects G.711 Pulse code modulation (PCM) of voice frequencies. G.712 Performance characteristics of PCM channels between 4-wire interfaces at voice frequencies. G.821 Error performance of an International digital connection forming part of an integrated services digital network. P.11 Effect Of Transmission Impairments P.16 Subjective effects of direct crosstalk; Thresholds of audibility and intelligibility P.76 Determination of Loudness rating; Fundamental principles Q.551 Transmission characteristics of digital exchanges. Q.554 Transmission characteristics at digital interfaces of a digital Exchange. BS SPECIFICATIONS BS 6305 NCOP - OFTEL Network Code Of Practice for the design of Private Telecommunications Networks ETSI SPECIFICATIONS ETSI/GSM Recommendation 03.50 - -------------------------------------------------------------------------------- PAGE 58 of 61 59 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- HISTORY ISSUE 1.0 JANUARY 1994 ISSUE 1.1 FEBRUARY 1994 ISSUE 2 DRAFT 1 JUNE 1994 ISSUE 2 JULY 1994 ISSUE 2.1 7 JULY 1994 ISSUE A AUGUST 1994 ISSUE B AUGUST 1994 ISSUE C JANUARY 1996 END OF SPECIFICATION BT Interconnect Standards PP 311, Angel Centre 403 St John St London EC1V 4PL - -------------------------------------------------------------------------------- PAGE 59 of 61 60 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- [BT LOGO and GRAPHIC] GENERIC SYNCHRONOUS DIGITAL HIERARCHY INTERFACE SPECIFICATION I/C SPECIFICATION 0120 - ------------------------------------------------------------------------------- PAGE 60 of 61 61 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- GENERIC SYNCHRONOUS DIGITAL HIERARCHY INTERFACE SPECIFICATION INTERCONNECT REQUIREMENTS The Synchronous Digital Hierarchy interface between the BT and Operator Systems shall be as defined in the "Technical Recommendation" agreed in the Public Network Operator - Committee for SDH Interconnect PNO-CSI (The PNO-CSI is a sub committee of the NICC - PNO-IG Network Interoperability Consultative Committee, Public Network Operators Group). The Operator shall provide a suitable compliance statement against the above Technical Recommendation. This compliance statement shall be discussed by BT and the Operator and when agreed shall confirm that the SDH system is suitable for interconnection of the BT and Operator Systems. FUNCTIONAL CHARACTERISTICS OF THE 2 MBIT/S INTERFACE The functional characteristics of the 2 Mbit/s interface shall be as specified in the BT Generic Electrical and Physical Interface Specification. REQUIREMENTS FOR COMPLIANCE STATEMENT
- --------------------------------------------------------- -------------------------------------------------- SPECIFICATION DESCRIPTION - --------------------------------------------------------- -------------------------------------------------- SDH interconnect between UK Licensed Operators - Defines interworking requirements at the Point of Technical Recommendation Connection for all SDH network layers - --------------------------------------------------------- -------------------------------------------------- Electrical and Physical Specification Section 5 functional characteristics of the 2Mbit/s interface. - --------------------------------------------------------- --------------------------------------------------
Copies of the PNO-IG SDH Technical Recommendation are available from NICC to members. HISTORY Issue D January 1996 BT Interconnect Standards PP 311, Angel Centre 403 St John St, London London EC1V 4PL - -------------------------------------------------------------------------------- PAGE 61 of 61 62 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX A PLANNING AND OPERATIONS INDEX A1 Definitions A2 General A3 Network Information A4 Location of Switch Connections A5 Routing Principles A6 ISI Interconnect Link Architecture A7 Capacity Provision A8 Traffic Forecasts A9 Capacity Profiles and Advance Capacity Orders A10 Capacity Orders and Testing A11 Capacity Order Timescales A12 Numbering A13 Technical Review Meetings A14 Switch Testing A15 Transmission and Signalling A16 Performance Standards A17 Operations A18 Services APPENDICES A BT/Operator Network Information B BT/Operator Interconnect Information C Commercial Page 1 of 81 63 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 1. DEFINITIONS 1.1 In this Annex, the Appendices and tables a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or appendix of this Annex. Words, abbreviations and expressions have the meanings given in Annex D. 2. GENERAL 2.1 This Annex details the planning and operational principles for conveying Calls between the BT System and the Operator System and provides the technical basis for the Specifications and for the Manuals. The Specifications define the characteristics of the interface between the BT System and the Operator System. The Manuals provide procedures for the provision and rearrangement of Capacity (Provisioning Manual), testing (Testing Manual) and operations and maintenance (Operations and Maintenance Manual). 2.2 This Annex contains provisions on the planning and operation of services provided under this Agreement. The details of the interconnect between the Parties' Systems and the plans for future developments relating to interconnect shall be recorded in the Technical Master Plan. The Customer Service Plan shall contain details of the points of contact within the Operator's and BT's organisation. The Parties shall endeavour to keep these documents up to date. 3. NETWORK INFORMATION 3.1 Insofar as not previously provided, each Party shall provide to the other the information listed in Appendix A as soon as reasonably practicable and in any event not more than 20 Working Days from the date of this Agreement. 3.2 In addition to the requirements set out in paragraph 4 of the main body of this Agreement, each Party will provide to the other information on any proposed introduction, closure, replacement or modification to any Switch referred to in paragraph 3.1 and where relevant, adjustments to the Number Ranges supported by such Switches as soon as practicable and, in any event, at not less than 4 months prior to the implementation. 3.3 Each Party will provide to the other, on request, information on the availability (or otherwise) of sufficient transmission capacity at any BT or Operator building for establishing IECs from that location. Page 2 of 81 64 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4. LOCATION OF SWITCH CONNECTIONS 4.1 BT SWITCH CONNECTIONS 4.1.1 The Operator shall nominate by written notice to BT, the BT Switch Connections at the following BT Exchanges identified in accordance with paragraph 3.1 (where the Operator wishes to handover Calls from the Operator System to the BT System): (a) Any BT Tandem Exchange; (b) Any BT DLTE; (c) Any BT DLE; (d) Any BT ISC. 4.1.2 BT shall nominate by written notice to the Operator, BT Switch Connections where BT wishes to handover Calls (for which BT has responsibility in accordance with paragraph 5.1.3) from the BT System to the Operator System. 4.1.3 The Operator shall nominate by written notice to BT, BT Switch Connections where the Operator wishes Calls (for which the Operator has responsibility pursuant to paragraph 5.1.3) to be handed over from the BT System to the Operator System. 4.2 OPERATOR SWITCH CONNECTIONS 4.2.1 BT shall nominate by written notice to the Operator, Operator Switch Connections at an Operator Exchange identified in accordance with paragraph 3.1 at which BT wishes to handover Calls from the BT System to the Operator System. 4.2.2 The Operator shall nominate by written notice to BT, Operator Switch Connections at which the Operator wishes to handover Calls (for which the Operator has responsibility in accordance with paragraph 5.1.3) from the Operator System to the BT System. 4.2.3 BT shall nominate by written notice to the Operator, Operator Switch Connections where BT wishes Calls (for which BT has responsibility pursuant to paragraph 5.1.3) to be handed over from the Operator System to the BT System. Page 3 of 81 65 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.3 AGREEMENT OF SWITCH CONNECTIONS 4.3.1 The Parties shall endeavour to agree which Switch Connections shall be used for the conveyance of Calls between the Parties. In the event that agreement cannot be reached either Party may notify the other in writing of a Dispute 5. ROUTING PRINCIPLES 5.1 RESPONSIBILITIES 5.1.1 Each Party shall route the other Party's traffic in accordance with the following routing principles: (a) routing within a Party's System shall be equivalent to the routing of similar types of traffic for the generality of such Party's Customers including alternative routing where appropriate; (b) insofar as practicable routing shall avoid analogue routing within a Party's own System. The Parties acknowledge that some International Calls and Calls to or from Third Party's systems may involve analogue routing. 5.1.2 The Parties shall develop and apply network traffic management strategies and procedures to maintain customer service quality and to protect the Parties' Systems as are appropriate. Full details of the network traffic management provisions are set out in the Operations and Maintenance Manual. These shall include: (a) designation of specific Traffic Routes to restore service if a route loss occurs; (b) establishment of overflow procedures if there is route congestion; (c) establishment of special procedures for busy circuits enabling either diversion of a Call to a different routing or diversion to an agreed tone or message. Page 4 of 81 66 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.1.3 The responsibilities for Traffic Types are set out in Table A below. The responsibilities include choice of Switch Connections, provision of Traffic Forecasts, provision of Capacity Profiles and placing of Capacity Orders. TABLE A
------------------------------------ ----------------------------------------- TRAFFIC TYPE PARTY HAVING THE RESPONSIBILITIES SET OUT IN PARAGRAPH 5.1.3 ------------------------------------ ----------------------------------------- Calls to geographic telephone numbers BT to Operator BT Operator to BT Operator ------------------------------------ ----------------------------------------- Calls to non-geographic telephone numbers BT to Operator BT Operator to BT Operator ------------------------------------ ----------------------------------------- International Calls BT to Operator to overseas BT Operator to BT to overseas Operator ------------------------------------ ----------------------------------------- Transit Calls BT to Operator to transit destination BT Operator to BT to transit destination Operator ------------------------------------ ----------------------------------------- Number Translation Services Calls BT to Operator Operator to BT BT Operator ------------------------------------ ----------------------------------------- Indirect Access Calls BT to Operator Operator Operator to BT BT ------------------------------------ ----------------------------------------- BT Operator services calls Operator to BT Operator ------------------------------------ ----------------------------------------- Emergency Calls Operator to BT Operator ------------------------------------ -----------------------------------------
5.1.4 Each Party shall ensure that a Route Type is provided on each Interconnect Link for the conveyance of Traffic Types for which that Party has responsibility in accordance with paragraph 5.1.3. Where a Party wishes to segregate its traffic into different Traffic Types it may order additional Route Types in accordance with Schedule 01 or 130 as appropriate. Where a Traffic Route is used for the conveyance of Calls for both Parties in accordance with the provisions of paragraph 5.2.8(2), a single Route Type may be used. Page 5 of 81 67 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.2 INTERCONNECT TRAFFIC ROUTE STRUCTURE 5.2.1 Subject to the provisions of paragraph 5.2.6 the Parties shall establish Interconnect Links to convey Calls between the BT System and the Operator System on Traffic Routes between each Operator Switch Connection and at least one BT DMSU. For Operators with geographic Number Ranges, such BT DMSU (except in the geographic area served by the 0171 and/or 0181 Director Area Numbers): (1) is a Parent BT Exchange for BT DLEs supporting Number Ranges for geographic NNGs shared between BT and the Operator; or (2) is a Parent BT Exchange for BT DLEs supporting Number Ranges for geographic NNGs serving the same geographic area as geographic NNGs used by the Operator and any Third Party Operator. 5.2.2 Subject to the provisions of paragraph 5.2.3, if the Operator uses Number Ranges in the geographic area served by the 0171 and/or 0181 Director Area Numbers and the adjacent BT Charge Groups, Traffic Routes shall be provided between each Operator Switch Connection supporting number ranges in such geographic area (served by the 0171 and/or 0181 Director Area Number or the adjacent BT Charge Groups) and at least one BT DJSU. 5.2.3 If the Operator delivers traffic to a BT Switch Connection at: (a) a single BT DMSU; or (b) a BT DMSU and a single BT DJSU; and if BT chooses to deliver traffic from more than one BT Switch Connection to the Operator System, then the relevant Interconnect Link shall be for BT's exclusive use and provided at BT's expense. 5.2.4 If the Operator wishes to provide Traffic Routes to more than one BT DJSU, the Parties shall agree the combination of DJSUs and the Traffic Streams to be routed through them. Under normal operations alternative routing of traffic between the Traffic Routes described in paragraphs 5.2.1 and 5.2.2 will not be available. 5.2.5 The Operator may choose to deliver International Calls (excluding those to Republic of Ireland) to the BT System to one or more BT ISC. Page 6 of 81 68 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.2.6. Notwithstanding the provisions of paragraph 5.2.1 if the Operator wishes to deliver only International Calls to the BT System (for conveyance to Authorised Overseas Systems other than the Republic of Ireland) the Operator may choose to deliver International Calls to one or more BT ISCs only. 5.2.7 If the Parties fail to agree the BT Tandem Exchanges or the BT ISC referred to in this paragraph 5.2 then either Party may notify the other in writing of a Dispute. 5.2.8 Interconnect Links shall have Traffic Routes such that: (1) for ISI, Traffic Routes shall be established to convey only those Traffic Types for which a Party has responsibility in accordance with paragraph 5.1.3; and (2) for Customer Sited Interconnect, Traffic Routes shall be established, either: a) in accordance with the provisions for ISI set out in (1) above; or b) for all Traffic Types. 5.2.9 Traffic Routes will be supported by not less than one Signalling Link Set, except for Traffic Routes to a BT ISC where the Operator has Interconnect Links to more than one BT ISC and uses C 7 (TUP) signalling. 5.2.10 The Party whose Switch Connection conveys the relevant Calls to the other's System shall assign Traffic Streams (identified by destination) to a particular Traffic Route. BT and the Operator shall, subject to paragraph 5.4 below, advise each other which Traffic Streams are assigned to which Traffic Route. Unless otherwise agreed, each Party shall use its reasonable endeavours to ensure that traffic is directed in accordance with the advice given to the other. Traffic so routed is primary traffic as described in paragraph 5.4. 5.2.11 Where there is a Traffic Route to or from a Switch Connection and notification has been given by either Party that the relevant Switch Connection is to be removed then no additional Capacity shall be provided on that Traffic Route save that agreed in the Advance Capacity Order current on the date when notification was given. 5.2.12 If BT conveys Emergency Calls from the Operator System BT shall allocate the same priority to Emergency Calls handed over from the Page 7 of 81 69 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Operator System as it provides to Emergency Calls from BT Customers. 5.2.13 A BT DLE is available solely for the delivery or collection of Calls to or from the Number Ranges served by that BT DLE. A BT DLTE is available for the delivery or collection of Calls to or from Number Ranges served by that BT DLTE and by BT DLEs directly connected to that BT DLTE. 5.2.14 All Calls to BT Number Translation Services shall be handed over at BT DMSUs. 5.2.15 All International Calls sent via the BT System shall be handed over at either BT DMSUs or BT ISCs and comply with the provisions of paragraph 5.6. 5.3 INTERCONNECT TRAFFIC ROUTE DIMENSIONING 5.3.1 Except as described in paragraphs 5.4.2 and 5.4.3 whereby two Traffic Routes may in combination provide the Fully Provided Capacity for a single Traffic Stream, Traffic Routes shall be Fully Provided to carry only the traffic for which Capacity has been ordered in accordance with this Annex and such Traffic Routes shall be operational at no worse than the required grade of service. 5.3.2 Where Traffic Route is used for the conveyance of Traffic for both Parties, the forecast requirement of Capacity shall be based upon the route busyhour. The forecasts shall be based upon a proposed grade of service of better than 0.008 subject to the route dimensioning giving a grade of service of better than 0.02 at 10 per cent traffic overload and better than 0.05 at 20 per cent traffic overload, unless the Parties agree otherwise. 5.4 INTERCONNECT ROUTING RULES 5.4.1 Traffic other than primary traffic shall be identified as overflow traffic. Overflow traffic has a lower priority than primary traffic. However: (a) overflow traffic from the Operator System which has overflowed because of a physical or operational failure of the BT System shall be given the same priority by BT as primary traffic; (b) overflow traffic from the BT System which has overflowed because of a physical or operational failure of the Operator System shall be given the same priority by the Operator as primary traffic; and Page 8 of 81 70 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (c) when a Call (which was part of the overflow traffic) is switched and the Call has seized a circuit on a Traffic Route, such Call shall lose the overflow categorisation and be treated in the same manner as the other traffic on that Traffic Route. 5.4.2 Operator to BT Traffic (1) The Operator may convey an entire Traffic Stream in one Traffic Route to one BT Switch Connection. These Calls shall be primary traffic. (2) The Operator may overflow a Traffic Stream to a BT Tandem Exchange provided that the Operator has a Traffic Route to that Switch. These Calls shall be overflow traffic. (3) For Calls conveyed on the Operator's written request to BT DMSU, BT DLTEs or BT DLEs BT shall arrange with the Operator for dual paths to be provided within the BT System. The design objective will be to split the Traffic Stream between two Traffic Routes in the ratio 1:1, with a maximum variation of + or - 1/3. These Traffic Routes shall be dimensioned to convey the expected Traffic Streams at the required grade of service. Calls may be initially offered to one Traffic Route or the other, with traffic re-routing to one Traffic Route or the other. (4) For Calls conveyed on the Operator's written request to BT DJSUs, BT shall arrange with the Operator for dual paths to be provided within the BT System, subject to the Parties agreeing the split of the traffic between any Traffic Routes. If the Parties fail to agree the traffic split, then either Party may notify the other in writing of a Dispute. (5) Any such arrangement shall provide for traffic carried on the planned routings in accordance with the planned traffic split to be primary traffic, with all traffic on a routing outside the permitted split as overflow traffic. (6) The Operator may choose between the following routing arrangements: 1st choice to planned route - primary traffic 2nd choice to unplanned route - overflow traffic or Page 9 of 81 71 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 1st choice to planned route - primary traffic 2nd choice to planned route - primary traffic (7) BT may charge reasonable additional rates for overflow traffic after two years from the date on which the BT System and the Operator System were or are to be interconnected where such overflow traffic results from a failure to order adequate Capacity to convey the relevant traffic. (8) Notwithstanding paragraph 5.4.2 (7), the Operator shall not pay additional rates for overflow traffic as a result of a physical or operational failure of the BT System. 5.4.3 BT to Operator Traffic (1) BT shall hand over traffic to Operator Switch Connections in accordance with the provisions of paragraph 5.2.1. (2) The following provisions shall apply if there is more than one Operator Switch Connection: (a) BT may convey an entire Traffic Stream in one Traffic Route to one Operator Switch Connection. These Calls shall be primary traffic. (b) BT may overflow a Traffic Stream to another Operator Switch Connection provided that BT has a Traffic Route to that Switch. These Calls shall be overflow traffic. (c) For Calls conveyed on BT's written request to Operator Exchanges the Operator shall arrange with BT for dual paths to be provided within the Operator System. In this instance, the design objective will be to split the Traffic Stream between two Traffic Routes in the ratio 1:1, with a maximum variation of + or - 1/3. These Traffic Routes shall be dimensioned to convey the expected Traffic Streams at the required grade of service. Calls may be initially offered to one Traffic Route or the other, with traffic re-routing to one Traffic Route or the other. (d) Arrangement under paragraph 5.4.3(2)(c) shall provide for traffic carried on the planned routings in accordance with the planned traffic to be split as primary traffic, with all traffic on a routing outside the permitted split as overflow traffic. Page 10 of 81 72 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (e) BT may choose between the following routing arrangements: 1st choice to planned route - primary traffic 2nd choice to unplanned route - overflow traffic or 1st choice to planned route - primary traffic 2nd choice to planned route - primary traffic (f) The Operator may charge reasonable additional rates for overflow traffic after the period of two years from the date on which the BT System and the Operator System were or are to be interconnected where such overflow traffic results from a failure to order adequate Capacity to convey the relevant traffic. (g) Notwithstanding paragraph 5.4.3 (2)(f), BT shall not pay additional rates for overflow traffic as a result of a physical or operational failure of the Operator System. 5.4.4 BT-Operator Indirect Access Traffic (a) If the Parties have agreed in a Schedule to convey Indirect Access Calls, the Operator shall nominate a BT Switch Connection to receive Indirect Access Calls from each BT Number Range in accordance with the technical principles contained in the Generic Transmission Interface Specification. (b) For Indirect Access Calls received at a BT Switch Connection and on the Operator's written request, BT shall arrange not less than one alternative path to be provided to the Operator System. Routing from the nominated BT Switch Connection to the Operator System shall be limited to Traffic Routes from that BT Switch Connection. 5.4.5 Operator to BT Number Translation Services Traffic The Operator shall convey Calls for BT Number Translation Services to a BT DMSU Switch Connection which is as near as practical to the origination of the Call, having regard to any requirements necessary to identify the intended destination. 5.5 INTERCONNECT ROUTE DIVERSITY AND SECURITY Page 11 of 81 73 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.5.1 Where either Party requests physical route diversity it shall take account of the Signalling Links and the Traffic Routes. 5.5.2 The Traffic Route(s) between an Operator Switch Connection and the relevant BT Switch Connection shall, subject to the normal planning practices of the relevant Party, ensure that a single failure of equipment does not give rise to failure of a Traffic Route. 5.6 ROUTING OF INTERNATIONAL TRAFFIC 5.6.1 The Operator may choose to hand over International Calls to BT DMSUs and/or BT ISCs, provided that, if the Operator has an obligation in the Operator Licence to provide "International Connection Services", International Calls shall only be routed and handed over via Interconnect Links established to one or more BT ISCs. 5.6.2 If an Operator chooses to hand over International Calls direct to an ISC and has Interconnect Links to more than one BT ISC, BT shall inform the Operator which BT ISC shall be first choice routing for a particular international destination and the Operator shall so route its International Calls. 5.6.3 Where agreed, or for NNGs allocated to the Operator for the provision of Land Mobile Radio Services for a digital service (GSM, PCN), Calls may be handed over to the Operator System from a BT ISC. Calls from an international destination to other NNG or "DE" Number Ranges assigned to the Operator shall be routed by BT from the BT ISC to the relevant BT DMSU to be handed over to the Operator System. 5.6.4 International Calls for conveyance to the Republic of Ireland shall be handed over to BT at a BT DMSU. 5.7 RECORD OF ARRANGEMENTS The Parties shall record the physical arrangements and Number Ranges, or part thereof, for each of the Traffic Routes on an Interconnect Link. Information shall be provided in accordance with the Provisioning Manual and a record of these arrangements shall be maintained in the Technical Master Plan. 6. ISI INTERCONNECT LINK ARCHITECTURE Page 12 of 81 74 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ISI Interconnect Links shall be transmission systems using either PDH or SDH technology, where the interfaces are set out in the Generic Electrical and Physical Interface Specification and, in the case of SDH, additionally in the Generic SDH Interface Specification. 6.1 ISI INTERCONNECT LINKS USING PDH (a) Equipment The manufacturer and type of equipment used to terminate the ISI Interconnect Link shall be the same at each end of the fibre and be one of those agreed and listed in the Provisioning Manual. (b) Procedures Operational procedures for the provision of PDH ISI Interconnect Links are described in the Provisioning Manual and their maintenance is described in the Operations and Maintenance Manual. (c) IECs Interconnect Extension Circuits may be used to complete ISI Interconnect Links to Remote Switch Connections. (d) Path Protection Where the Operator requests Path Protection using PDH, as set out in Schedule 01, the manufacturer and type of equipment used to effect the Path Protection shall be the same at each end of the fibre and be one of those agreed and listed in the Provisioning Manual as suitable for supporting Path Protection. 6.2 ISI INTERCONNECT LINKS USING SDH (a) Configuration ISI Interconnect Links will deliver the equivalent functionality to an ISI Interconnect Link using PDH technology. For the avoidance of doubt if an ISI Interconnect Link uses SDH technology all traffic within the BT System flowing to or from the 155 Mbit/s STM-1 Add-Drop Multiplexor will be carried by Intrabuilding Links or IECs and there shall, unless the Operator has requested Path Protection, be one single physical path between the 155 Mbit/s STM-1 Add-Drop Multiplexors. (b) Equipment Page 13 of 81 75 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- The manufacturer and type of equipment that BT shall use to terminate the SDH ISI Interconnect Link shall be those listed in the Provisioning Manual. The Operator may use any equipment that conforms to the Generic SDH Interface Specification. (c) Management Neither Party shall exercise management control of the other Party's 155 Mbit/s STM-1 Add-Drop Multiplexor. In particular, the transmission messages to the other Party via the Data Communications Channel (DCC) in the STM-1 Add-Drop Multiplexor section overhead shall be inhibited. (d) Testing and Operational Procedures If the Operator chooses to use equipment that has not been validated to ensure that it interworks with the equipment that BT uses, the Parties shall test the equipment to ensure that the performance standards are met. Unless otherwise agreed such testing shall be completed before an order for such an Interconnect Link is placed. If the Parties agree to carry out the testing after an order is received that order shall be subject to adjustment of the delivery date to include such tests. Operational procedures for the provision of SDH Interconnect Links are described in the Provisioning Manual and their maintenance is described in the Operations and Maintenance Manual. (e) IECs Interconnect Extension Circuits shall be provided using PDH or SDH at the suppliers election solely for the completion of ISI Interconnect Links to Remote Switch Connections. (f) Path Protection If the Operator requests Path Protection, all VC paths shall terminate on a single add-drop Multiplexor at the BT Switch Connection. This configuration shall be used where VC Path Protection is deployed in the SDH equipment terminating the VC paths. 7. CAPACITY PROVISION 7.1 INITIAL INTERCONNECTION Prior to the first Capacity Order under this Agreement: 7.1.1 the Operator shall provide BT with the following information: Page 14 of 81 76 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (1) details about the proposed Operator Exchange or Exchanges, software build level and of the relevant Operator Switch Connections nominated by the Operator; (2) details of the relevant BT Switch Connections nominated by the Operator; (3) details of the services (as in the Schedules) which the Operator requires on the first Ready for Service Date; (4) Number Ranges served by and that may be accessed via the Operator System; (5) a statement of the conformity of the Operator System to the Specifications; (6) the first Capacity Profile (as described in paragraph 9 below); (7) the first Traffic Forecasts (as described in paragraph 8 below); (8) proposed Traffic Routes, by Number Ranges (in the form set out in the Provisioning Manual); (9) details of proposed Points of Connection and Interconnect Links; (10) Where the Operator intends to send Emergency Calls to the BT System, and the Operator Licensed Area is smaller than the geographic area covered by the BT System, the Operator shall provide BT with a map showing the boundary of the area from where Emergency Calls are to be sent to the BT System to a scale of approximately 1:50,000. 7.1.2 BT shall provide the Operator with the following information: (1) proposed signalling and testing requirements within the time scale set out in paragraph 14.2 below; (2) details of the relevant Operator Switch Connections and BT Switch Connections nominated by BT (if any), within 20 Working Days of a written request by the Operator; (3) proposed Traffic Routes by Number Ranges if the Operator is planning to use more than one Operator Switch Connection at the first Ready for Test Date within 20 Working Days of a written request by the Operator. Page 15 of 81 77 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7.1.3 The information specified in paragraphs 7.1.1 and 7.1.2 above shall be exchanged in the manner detailed from time to time in the Provisioning Manual. A summary of that information specified is set out in Appendix B to this Annex. The Parties shall hold such meetings as are required for this exchange of information. 7.2 Where the Operator is seeking an initial interconnection to the BT System to transfer traffic generated by an established customer, the Operator shall provide BT not less than 20 Working Days prior to the first planning meeting referred to in paragraph 7.1.3 above with the following information: (1) traffic volumes from the Operator System to the BT System for each proposed BT Switch Connection; (2) traffic volumes from the BT System to the Operator System for each proposed BT Switch Connection; and (3) specific requirements for the transfer of the Operator's existing Number Ranges. 8. TRAFFIC FORECASTS 8.1 GENERAL Traffic Forecasts shall be used by the Parties for planning sufficient switch and distributive network capacity to meet subsequent Capacity Order requirements. While the Parties shall use reasonable endeavours to provide accurate Traffic Forecasts, they shall not be legally binding except to the extent stated otherwise in this Agreement. 8.2 TRAFFIC FORECAST CONTENT 8.2.1 Traffic Forecasts for each BT Switch Connection shall be prepared by the Operator being the aggregate of the Traffic Types listed in Table A of this Annex for which the Operator is stated to have the responsibility as defined in paragraph 5.1.3. In addition the Operator shall prepare Traffic Forecasts for each Operator Switch Connection being the aggregate of the specific Traffic Types listed in Table A for which BT is stated to have the responsibilities as defined in paragraph 5.1.3. However BT shall forecast this traffic when it is mature, that is when the dominant factor in forecasting future traffic trends is the general economic trends affecting the UK. Page 16 of 81 78 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- All Traffic Forecasts shall be in the form set out in the Provisioning Manual. 8.2.2 Where a BT ISC is used as a BT Switch Connection, Traffic Forecasts shall define the following: (a) outgoing traffic by destination country where the busy hour traffic is expected to exceed 5 erlangs; (b) the total outgoing traffic for all countries where the busy hour traffic is less than 5 erlangs. 8.2.3 The Parties shall endeavour to agree for each Traffic Route immediately following the second anniversary of the Ready for Service Date of that Traffic Route whether such Traffic Route is mature. If the Parties fail to agree whether a Traffic Route is mature then either Party may notify the other in writing of a Dispute. 8.3 FORECASTING PERIODS 8.3.1 Traffic Forecasts shall be on a rolling basis for a period of three years. 8.3.2 A Traffic Forecast provided by the Operator to BT at yearly intervals for each Switch Connection pursuant to paragraph 8.2 shall be made available at least 15 Working Days before the Technical Review Meeting immediately before the Traffic Forecast period next following. These Traffic Forecasts shall (subject as provided below) cover the following three years broken down for each quarter for the first two years. 8.3.3 For each mature Traffic Route (as defined in paragraph 8.2), BT shall supply the Operator with the Traffic Forecasts at yearly intervals, not less than 15 Working Days before the Technical Review Meeting immediately prior to the period which is the subject of the Traffic Forecast. These Traffic Forecasts shall cover the following three years broken down for each quarter for the first two years. 8.3.4 If either Party's Traffic Forecast for a category of traffic for any twelve month period at any Switch Connection has changed 10 per cent. or more since the last Traffic Forecast or where any additional Switch Connection is proposed by such Party during the next twelve months, then the changed Traffic Forecast shall be notified not later than the next Technical Review Meeting following such change or adoption of such proposal. Page 17 of 81 79 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 8.3.5 During the first two years after the first Ready for Service Date, the Operator may supply Traffic Forecasts covering only two years. Thereafter, such Traffic Forecasts shall cover a period of three years. 8.4 TRAFFIC FORECAST INFORMATION 8.4.1 Traffic Forecasts supplied pursuant to paragraph 8.3 shall: (a) be in terms of day and evening busy hour Erlangs. The day busy hour shall be within the period 0800 to 1800 hours and the evening busy hour shall be within the period 1800 to 0800 hours except where agreed otherwise; (b) identify the time of the busy hour for a Traffic Route to be configured pursuant to paragraph 8.1; (c) be in the form set out in the Provisioning Manual and may be in an electronic form agreed between the Parties; (d) be authorised and signed at an appropriate level by the originating Party and acknowledged by the receiving Party. 8.5 FORECASTING EVOLUTION 8.5.1 The Parties may agree to modify the procedures in this paragraph 8 if and when additional Traffic Routes and/or Traffic Streams are identified or if presently planned Traffic Routes are subdivided. 8.5.2 The forecasting procedures shall be reviewed at the Technical Review Meeting to discuss routing and forecasting matters and to agree changes and appropriate timings for their implementation. 9. CAPACITY PROFILES AND ADVANCE CAPACITY ORDERS 9.1 Before placing Capacity Orders, the Operator shall (subject to paragraph 9.2 below) supply BT with Capacity Profiles in relation to Capacity Provision and Capacity Re-arrangement at all existing and proposed Switch Connections. In paragraphs 9 and 10 and subject to paragraph 11.4, Capacity Rearrangement may only be initiated by the Purchaser of the Capacity which is being rearranged. Each Capacity Profile shall encompass all the Operator's requirements for Capacity and shall be identified for each relevant Switch Connection. The obligation of the Operator under this paragraph in relation to a particular Switch Connection shall cease when the information is provided by BT under paragraph 9.2. 9.2 With effect from the second anniversary of the Ready for Service Date (or such later date as the Parties may agree pursuant to paragraph 8.2.3) for each Page 18 of 81 80 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Switch Connection, BT shall supply the Operator with a Capacity Profile for Traffic Types for which BT has responsibility pursuant to paragraph 5.1.3. The Capacity Profile shall encompass all Capacity Provision or Capacity Re-arrangement requirements and be categorised for each relevant Operator Switch Connection. The Parties acknowledge that each BT Capacity Profile shall reflect the information contained in the relevant Traffic Forecast provided under paragraph 8, plus any other relevant additional information that the Operator has provided to BT (which shall include any necessary advice on the timing of Capacity Provision). 9.3 Capacity Profiles for Capacity Provision and Capacity Re-arrangement shall be provided on separate forms as described in the Provisioning Manual. The first four months of each Capacity Profile agreed in accordance with paragraph 9.5 shall form an Advance Capacity Order pursuant to paragraph 10. 9.4 Each Capacity Profile shall be presented to the other Party at four month intervals, not less than 15 Working Days before the relevant Technical Review Meeting. 9.5 Each Capacity Profile shall be reviewed at the relevant Technical Review Meeting. Where agreed it will be signed within 10 Working Days by the authorised representatives of each Party to signify their intention to commit to the Advance Capacity Order. 9.6 If the Parties fail to agree a Capacity Profile (or part thereof), then either Party may notify the other in writing of a Dispute. 9.7 Those portions of an Advance Capacity Order that have not been agreed shall be a Dispute. Paragraph 10 shall apply to those parts that have been agreed (and signed by the Parties). 10. CAPACITY ORDERS AND TESTING 10.1 CAPACITY ORDERING 10.1.1 In an ACO Period the Operator may, in respect of any BT Switch Connection nominated by the Operator (for traffic handed over from the Operator System to the BT System), and, during the period ending two years after the first Ready for Test Date, in respect of any Operator Switch Connection nominated by BT (for traffic handed over from the BT System to the Operator System), place Capacity Orders up to the amount of the aggregate Capacity Provision (i.e. Capacity to be provided plus the provide element of Capacity to be rearranged) shown in the relevant Advance Capacity Orders for each such Switch Connection plus the greater of (a) 10 per cent. of such Capacity and (b) 4 x 2Mbit/s units of Capacity. Within these limits each Party shall Page 19 of 81 81 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- provide such Capacity that it is to provide within the time scales laid down in paragraph 11. For the period ending two years after the first Ready for Test Date, the reference in (b) to 4 x 2Mbit/s units of Capacity shall be increased to 8 x 2Mbit/s units of Capacity. 10.1.2 In an ACO Period the Operator shall place Capacity Orders for a minimum of 80 per cent. of the aggregate Capacity specified in the relevant Advance Capacity Orders for each Switch Connection, other than Capacity required at any Operator Switch Connection for incoming traffic from the BT System. Failure by the Operator to place such Capacity Orders shall result in pre-payment charges being paid by the Operator in accordance with paragraph 1 of Appendix C. Pre-payment charges arising with respect to a specific Switch Connection shall be accepted as pre-payment for future Capacity Orders in respect of Capacity for the same Switch Connection placed within 12 months of the end of the relevant ACO Period (thereby being credited against any charges payable by the Operator in respect of such Capacity Order(s)). 10.1.3 Capacity Orders placed by the Operator (on behalf of BT) for Capacity in respect of Traffic Types for which BT has the responsibility pursuant to paragraph 5.1.3, and any increase in order quantities above those agreed in the relevant Advance Capacity Order (subject to the limits set out in paragraph 10.1.1) shall require written agreement from BT prior to the placing of the relevant Capacity Order. If the Parties fail to agree an increase in a Capacity Order, either Party may notify the other in writing of a Dispute. 10.1.4 Within any ACO Period commencing two years after the Ready for Service Date for a particular Switch Connection, BT may place Capacity Orders for Capacity required at that Operator Switch Connection for Traffic Types for which BT has the responsibility pursuant to paragraph 5.1.3, up to the amount of the aggregate Capacity Provision (i.e. Capacity to be provided, plus the provide element of Capacity to be rearranged) shown in the relevant Advance Capacity Orders for such Operator Switch Connection plus, for any Operator Switch Connection, the greater of (a) 10 per cent. of such Capacity and (b) 4 x 2Mbit/s units of Capacity. The Operator shall provide such Capacity within the relevant time scales specified in paragraph 11. 10.1.5 Within any ACO Period commencing two years after the Ready for Service Date of a Switch Connection, BT shall place Capacity Orders for a minimum of 80 per cent. of the aggregate Capacity specified in the relevant Advance Capacity Orders for that Operator Switch Connection. Failure by BT to place such Capacity Orders shall result in pre-payment charges being paid by BT in accordance with the Page 20 of 81 82 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- provisions set out in paragraph 1 of Appendix C. Pre-payment charges arising with respect to a specific Operator Switch Connection will be accepted as pre-payment for future Capacity Provision Orders in respect of Capacity at the same Switch Connection placed within 12 months of the end of the relevant ACO Period (thereby being credited against any charges payable by BT in respect of such Capacity Order(s)). 10.1.6 If no Advance Capacity Order is provided or Capacity Orders are placed by the ordering Party in excess of the relevant limit in paragraph 10.1.1 or 10.1.4: (1) the Supplier shall not be obliged to meet the time scales set out in paragraph 11 for that element of the Capacity Order in excess of the relevant limit; (2) the time scales shall be agreed in writing for the provision of excess Capacity and the Ready for Test Dates shall be not later than 6 months after the date of receipt of a relevant Capacity Order; and (3) the Supplier of Capacity in excess of the relevant limit may raise charges to cover any additional costs that it may incur arising directly from the provision of Capacity outside the normal planning process. Neither Party will incur such additional costs or provide Capacity outside the Advance Capacity Order process without the prior written approval of the other. 10.1.7 Each Capacity Order will be in the form set out in the Provisioning Manual and shall include all the information required by that form. 10.1.8 The tributary allocation charts as set out in the Provisioning Manual, shall be amended by BT, unless agreed otherwise and included in the Technical Master Plan. 10.2 TESTING TIMETABLES 10.2.1 (1) BT and the Operator shall commence testing Capacity not later than 25 Working Days after the relevant scheduled Ready for Test Date. Unless agreed otherwise, the Purchaser shall provide the Supplier with a minimum of 15 Working Days notice of the date on which testing should commence. The Parties shall co-operate to ensure that testing is reasonably spread across the 25 Working Days following the date on which the Capacity is made ready for testing. The Parties shall use reasonable endeavours to complete testing in the shortest appropriate time. Page 21 of 81 83 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (2) If for any reason the Purchaser fails to proceed jointly with the Supplier in testing of any Capacity, the Purchaser shall notify the Supplier in writing as soon as possible and where such notice is less than 5 Working Days before the scheduled Ready for Test Date, the provisions set out in paragraph 3 of Appendix C of this Annex shall apply. Testing shall then be re-scheduled by agreement and commenced on such re-scheduled date. In the event of testing failing the Parties shall use reasonable endeavours to ensure testing is recommenced and concluded as quickly as possible. (3) The Parties shall agree the required test facilities. The Parties shall make such test facilities available from the date required by the other Party. If specified test facilities are missing or incorrect, Capacity Orders or Data Management Amendments will not commence until the facilities are made available. (4) If the Party providing Capacity fails to commence testing Capacity by a date 25 Working Days after the relevant periods of time specified in paragraph 11 below, then (without prejudice to the other Party's rights and remedies under the Agreement) the Party providing the Capacity shall pay, on demand, to the other Party liquidated damages for such delay calculated in accordance with the provisions of paragraph 2 of Appendix C for up to a maximum of 25 Working Days. (5) If the Parties fail to agree an acceptable date for the testing of the Capacity (pursuant to 10.2.1 (2)) either Party may notify the order in writing of a Dispute. 10.2.2 On the Ready for Test Date the Supplier shall notify the Purchaser that such Capacity is Ready for Testing. Such notice shall be in the form set out in the Provisioning Manual. 10.2.3 As soon after the Ready for Service Date as is practical, both Parties shall certify that the Capacity has been satisfactorily tested by signing the certificate set out in the Operations and Maintenance Manual. 10.3 CONGESTION Where a Traffic Route is used for the conveyance of traffic for both Parties and either Party detects the grade of service referred to in paragraph 5.3.2 not being met because of non-transient causes or identifies a trend that will lead to such grade of service not being met in the current or next ACO Period, the Operator shall order Route Augmentation such that the problem or potential problem is alleviated. Page 22 of 81 84 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 10.4 TESTING AND COMMISSIONING PROCEDURES The Parties shall jointly test the Capacity and any service specific items and make any necessary adjustment to ensure that the Capacity meets the agreed performance standards. Details of the testing procedures are included in the Testing Manual. 11. CAPACITY ORDER TIMESCALES 11.1 TIMESCALES FOR PROVISION OF CAPACITY The timescales for the provision of Capacity Ready for Testing are subject to the provisions set out in Schedules 01 and 130 (as appropriate) and, paragraph 10.1.6. The time scales are set out in paragraphs 11.1.3 to 11.1.6 inclusive and are concurrent with those set out in paragraph 11.1.1 and 11.1.2): 11.1.1 Capacity Provision at a Switch Connection for a Traffic Route passing through a new Point of Connection on an Interconnect Link using PDH or SDH: 6 months following the date of receipt of the relevant Capacity Order. 11.1.2 Capacity Provision or Capacity Re-arrangement at a Switch Connection requiring a change of technology from PDH to SDH or SDH to PDH for a new or existing Traffic Route at an existing Point of Connection: 6 months following the date of receipt of the relevant Capacity Order. 11.1.3 New Traffic Routes between Switch Connections through an established Point of Connection using the same technology, including the provision of additional Customer Sited Interconnect between the same Switch Connections: 65 Working Days following the date of receipt of the relevant Capacity Order. 11.1.4 Route Augmentation using the same technology, including the provision of additional Customer Sited Interconnect between the same Switch Connections: 25 Working Days following the date of receipt of the relevant Capacity Order. Page 23 of 81 85 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 11.1.5 New Traffic Routes over IECs at a Switch Connection using the same technology: 75 Working Days following the date of receipt of the relevant Capacity Order. 11.1.6 Route Augmentation using the same technology on Traffic Routes over established IECs: 35 Working Days following the date of receipt of the relevant Capacity Order. 11.1.7 Capacity Re-arrangements involving the provision of new Traffic Routes using the same technology or a new technology already in service at the relevant Switch Connection: 65 Working Days following the date of receipt of the relevant Capacity Order. 11.1.8 Capacity Re-arrangements between established Switch Connection involving Route Augmentation using the same technology or a new technology already in service at the relevant Switch Connection: 25 Working Days following the date of receipt of the relevant Capacity Order. 11.1.9 Capacity Re-arrangements involving the provision of new Traffic Routes requiring IECs using the same technology or a new technology already in service at the relevant Switch Connection: 75 Working Days following the date of receipt of the relevant Capacity Order. 11.1.10 Path Protection - on a date such as the Parties shall agree. 11.2 REMOVAL OF CAPACITY 11.2.1 Subject to the relevant Schedules if either Party requires the removal of Capacity it paid for (or for which payment is due by that Party under this Agreement), an order identifying the Capacity and the date from which it is no longer required (a "removal order") may be placed by that Party on the other Party. The Party receiving the removal order will remove the Capacity not later than 30 Working Days from the date of receipt of the removal order. 11.2.2 If either Party requires the removal of Capacity paid for by the other Party (or for which payment is due by the other Party under this Page 24 of 81 86 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Agreement) or the removal of Capacity used for bothway working then a written request shall be sent to the other Party detailing the requirement and giving the reasons for its removal. If the Party receiving the request agrees to the removal of the Capacity such Party shall issue a removal order to the Party requesting the removal. This Capacity will then be removed by the Supplier within 30 Working Days from the date of receipt of the removal order. If the Party receiving the request does not agree then Capacity shall not be removed until agreement has been reached or a Dispute is resolved. 11.2.3 A removal certificate shall be issued to the Party who paid (or who is responsible for payment) for the Capacity on completion of the removal work. 11.2.4 For the avoidance of doubt, if payment for Capacity removed pursuant to this paragraph 11 has not been made at the time of such removal such payment shall remain due and payable. 11.2.5 If pursuant to this paragraph 11.2 Capacity is removed, a proportion of the relevant connection charge shall be repaid to the Party requesting the removal. The amount to be repaid shall be that set out in paragraph 4 of Appendix C to this Annex. 11.3 ORDER AMENDMENT 11.3.1 Capacity Orders may be amended as follows: (a) Capacity Orders which incorporate agreed amendments requested by the Supplier or are corrections of simple typing mistakes which do not affect the Ready for Test Date nor the implementation by the Supplier will not incur any charges. (b) Capacity Orders may be withdrawn free of charge up to 10 Working Days from receipt of the relevant Capacity Order by the Supplier. Capacity Orders, including any placed in the last 10 Working Days of an ACO Period which bring the total orders up to 80% of the Capacity specified in the ACO, and subsequently cancelled within 10 Working Days of placing those orders shall not be included in the amount of Capacity ordered in the relevant ACO Period. (c) Capacity Orders may be amended at a charge, details of which are specified from time to time in the Carrier Price List, up to 10 Working Days from receipt of the Capacity Order by the Supplier. The original date that the Capacity Order was placed Page 25 of 81 87 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- will apply for the purpose of identifying the Ready for Test Date. (d) Capacity Order amendments received after 10 Working Days from receipt of the original Capacity Order by the Supplier which do not have a material affect on the order (i.e. editorial change, data build change only, without change of Supplier's Exchange or other change which the Parties reasonably agree does not materially affect the Capacity Provision within the stated time scales) will be accepted by the Supplier without a change in the Ready for Test Date at a charge which is set out in the Carrier Price List. Where an amendment involves data build changes, the order amendment must be received by the Supplier not later than 10 Working Days before the Ready for Test Date 11.3.2 If a Capacity Order is amended other than as set out in (a) (b) (c) or (d) above, and the amendment is to reduce the Capacity originally ordered, the Purchaser shall pay the charge set out in paragraph 5 of Appendix C. The Supplier shall accept such an amendment without a change in the Ready for Test Date. 11.3.3 The Supplier may extend a Ready for Test Date where there have been two or more order amendments to any matter included in the order form set out in the Provisioning Manual during the first 10 Working Days following receipt of a Capacity Order. 11.4 CAPACITY REARRANGEMENT Capacity Rearrangement may be requested as follows: (a) The Purchaser may request in writing Capacity Rearrangement, and the Supplier shall carry out the necessary work in accordance with the time scales set out in paragraph 11.1. Capacity Orders, including any placed in the last 10 Working Days of an ACO Period which bring the total Capacity Orders up to 80% of the Capacity specified in the ACO, and subsequently cancelled within 10 Working Days of placing those orders shall not be included in the amount of Capacity ordered in the relevant ACO period. (b) If the Supplier requests Capacity Rearrangement of Capacity previously provided by the Supplier, the Supplier shall notify the Purchaser in writing giving reasons for its request. If the Purchaser accepts the request it shall confirm the same in writing. The Supplier shall then at its own expense carry out the Capacity Rearrangement in accordance with the request. The Purchaser shall not unreasonably withhold or delay consent to such request provided that arrangements Page 26 of 81 88 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- are made, in accordance with this Agreement where applicable, to ensure that no loss is caused to or suffered by the Purchaser as a result of the Capacity Rearrangement. (c) The Supplier shall issue a certificate to the Purchaser on completion of work carried out pursuant to paragraph 11.4 (a) or (b). The Purchaser may submit requests for Capacity Rearrangement in writing to the Supplier at any time after the earlier of Ready For Service Date or one month after Ready For Test Date. (d) On completion of a Capacity Rearrangement the original Capacity is deemed terminated and replaced by the rearranged Capacity. 11.5 CANCELLATION OF ORDER At any time prior to the Ready for Test Date a Party may by written notice to the other cancel a Capacity Order it placed. If a Capacity Order is cancelled more than 10 Working Days after placement of the Capacity Order, the cancelling Party shall pay a cancellation charge as set out in paragraph 6 of Appendix C. 11.6 GENERAL The Party in receipt of a Capacity Order shall make the relevant Capacity available and Ready for Testing within the time scale specified in paragraph 11.1. The receiving Party shall notify the ordering Party of such receipt within one Working Day of receipt. 12. NUMBERING 12.1 NUMBERING ORDERS BT shall implement numbering orders for Number Ranges or other changes to data on BT Exchanges in accordance with Schedule 140. 12.2 NUMBER FLOW 12.2.1 The Parties shall convey to each other telephone numbers in the national and international number formats from time to time in force. 12.2.2 For Calls to or from a BT ISC where C 7 (IUP) signalling is used, all digits including the leading zero, shall be conveyed across the interface from the sending Party's System to the other Party's System. Page 27 of 81 89 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 12.2.3 For Calls to a BT ISC, where C 7 (TUP) signalling is used, the Operator shall convey all digits except the international prefix. For Calls from a BT ISC where C 7 (TUP) signalling is used BT shall convey all digits including the leading zero. 12.3 NUMBER INFORMATION At appropriate intervals each Party shall inform the other of all numbering additions and changes to Number Ranges within the BT System or Operator System that may affect Call routing. 13. TECHNICAL REVIEW MEETINGS 13.1 The first Technical Review Meeting shall occur at either Party's written request not later than four months from the receipt of the first Capacity Profile. Subsequent Technical Review Meetings shall occur at no greater than four monthly intervals thereafter, not less than 5 Working Days prior to the start of the relevant four month period next following. 13.2 At Technical Review Meetings the Traffic Forecast referred to in paragraph 8 shall be discussed and the Capacity Profiles referred to in paragraph 9 shall be agreed. 14. SWITCH TESTING 14.1 TESTING PRINCIPLES Each Party shall have the right to require testing of the other Party's Switch(es) to confirm correct interworking. The testing varies according to the Switch manufacturer, the software build level and the method of implementation. The scope of the testing shall follow the relevant ITU-T guidelines. 14.2 TESTING INFORMATION 14.2.1 Not later than 10 Working Days after a written request by one Party, the other Party shall provide an initial indication of the level of testing required, having been given details of Switch hardware and software build level and services. The Parties shall agree exact test requirements and timescales. 14.2.2 If, owing to the default of one of the Parties the testing procedures vary substantially from the test procedures agreed pursuant to this paragraph, the other Party may levy a reasonable charge for its direct costs resulting from such default. Page 28 of 81 90 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 14.3 Where BT requests testing, the following provisions shall apply: 14.3.1 Reduced Level of Testing A Switch proposed as an Operator Exchange, of the same type previously successfully tested for the same type of interconnect, at the same software build will need the minimum of testing. A list of such Switches is set out in the Provisioning Manual. Commissioning and Acceptance Testing ("CAT") of such an Operator Exchange may take approximately four weeks. For additional Operator Exchanges, Traffic Routes and Capacity interconnected to the BT System, operational testing at a suitable level will take place as described in the Testing Manual. 14.3.2 Intermediate Level of Testing A Switch proposed as an Operator Exchange of a type previously successfully tested at a different software build or implementation, will need additional testing, if such different build or different implementation could reasonably be considered likely to adversely affect Call processing. Both Network Inter-working Tests ("NIT") using BT captive models and CAT will be required, which may take approximately eight weeks. 14.3.3 Full Switch Testing A Switch proposed as an Operator Exchange or major build change of an existing Operator Exchange not previously successfully tested for the same type of interconnect shall require Interface Validation Testing ("IVT") by the Operator, using a protocol simulator, which may take the Operator about six weeks. The total testing duration for IVT, NIT and CAT may be approximately 14 weeks. This period of time (other than for the testing specified in paragraph 14.3.1) may, subject to the availability of the necessary BT captive models at the Operator's written request, be concurrent with the time scale set out in paragraph 11.1.1 above. 14.4 Where the Operator requests testing it will employ testing no more onerous than those set out in paragraph 14.3 such testing shall be of no greater duration. 14.5 In the event that the Parties fail to agree any test procedure and/or time scale, then either Party may notify the other in writing of a Dispute. 15. TRANSMISSION AND SIGNALLING Page 29 of 81 91 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 15.1 TRANSMISSION Interconnection of the BT System and the Operator System shall be based on digital technology operating at 2Mbit/s in accordance with the Generic Transmission Interface Specification and, if appropriate, the Generic SDH Interface Specification. 15.2 SYNCHRONISATION 15.2.1 The Parties shall comply with the applicable synchronisation provisions of the Generic Electrical and Physical Interface Specification. Where requested, BT shall supply synchronisation from the highest order available within the relevant part of the BT System. 15.2.2 Where SDH equipment is used as part of an ISI Interconnect Link, synchronisation of the relevant SDH equipment shall be provided in accordance with ITU-T Recommendation G.803. However the STM-N timing quality should not be assumed to be referable to a clock of ITU-T Recommendation G.811 standard. 15.3 ECHO CONTROL 15.3.1 If International Calls are conveyed by the Operator to a BT ISC or handed over to the Operator by BT directly from a BT ISC, the Parties shall obtain the correct echo control by conveying signalling information in accordance with the Generic Transmission Interface Specification and the Generic C7 Signalling Interface Specification. 15.3.2 Some Calls within the UK require echo control. The Parties shall obtain the correct echo control by conveying signalling information in accordance with the Generic Transmission Interface Specification and the Generic C7 Signalling Interface Specification. 15.4 SIGNALLING The Parties shall comply with the applicable signalling provisions of the Generic C7 Signalling Interface Specification. 15.5 CIRCUIT SELECTION Where bothway working is employed, the following circuit selection protocols shall apply: (1) Circuit Selection Protocols Page 30 of 81 92 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) BT shall use the forward sequential protocol, starting from the first traffic circuit and selecting sequentially until a free circuit is found. (b) The Operator shall use the backward sequential protocol, starting from the last traffic circuit and selecting sequentially until a free circuit is found. (2) Direction of search (a) From BT to Operator, direction of traffic circuit 1 to Z. (b) From Operator to BT, direction of traffic circuit Z to 1. 15.6 DUAL SEIZURE BT shall have dual seizure priority. 15.7 NUMBERING OF TRAFFIC CIRCUITS Circuits shall be identified pursuant to the Generic Signalling Interface Specification. 15.8 ANSWER SIGNALS Each Party shall provide the other with details of the timing and circumstances for the provision of all Answer Signals sent from that Party's System including those for all types of Calls. 16. PERFORMANCE STANDARDS 16.1 GENERAL 16.1.1 The Parties shall co-operate to maintain the overall quality of the conveyance of Calls and adopt the general principles on standards, techniques and methodology for the achievement of quality in telecommunications networks and services contained in the relevant ITU-T standards. 16.1.2 The Parties shall agree operational management strategies to protect service quality and to alleviate short term overloads due to abnormal conditions and address congestion due to under provisioning. 16.2 CALL SERVICE PERFORMANCE 16.2.1 The Parties shall agree relevant service parameters and measurements for the monitoring of service performance. These will typically Page 31 of 81 93 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- include sample sizes, frequency, time and performance threshold criteria. This data includes actual measurements of exchange or route busy hour traffic (Erlangs), lost communications (overflows), number of Calls alternatively routed, Answer Seize Ratio ("ASR") and busy hour call attempts. This shall be exchanged on a monthly basis. Exception reports shall be provided where standards have not been met or if performance thresholds have not been attained. The Parties shall use their reasonable endeavours to detect and correct adverse trends before they result in adverse performance. 16.2.2 If a service performance problem is identified, the Parties shall exchange information about the problem, including the information set out in paragraph 16.2.1 above together with the following information: (1) critical levels for traffic and unsuccessful Call attempts; (2) information on sources of traffic; (3) information on timing synchronisation and slippage rates. 16.2.3 Where congestion occurs on a Traffic Route used for the conveyance of Traffic for both Parties, the Parties shall agree and apply appropriate network management procedures in accordance with the provision described in the Operations and Maintenance Manual. Where such agreement cannot be reached, either Party may apply appropriate network management procedures to Traffic originating in its System to alleviate the problem. 16.2.4 The Parties shall use reasonable endeavours to identify and resolve the problem and if the Parties fail to resolve the problem it shall become a Dispute. 16.3 INTERCONNECT LINK SERVICE PERFORMANCE Transmission performance standards over an Interconnect Link shall be based on availability, errored seconds and severely errored seconds over a one month period. 16.4 INFORMATION ON PERFORMANCE STANDARDS Each Party ("the first Party") shall provide to the other, as the other Party may reasonably require, information on the performance standards of the first Party's System from time to time for the purpose of the other Party verifying the performance by the first Party of its obligations under this Agreement, including without limitation the performance standards referred to in this paragraph 16, routine maintenance time scales and fault repair times as set out in the Operations and Maintenance Manual. Page 32 of 81 94 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 17. OPERATIONS 17.1 GENERAL 17.1.1 Each Party shall be responsible for the safety and operation of its own System. 17.1.2 The Operations and Maintenance Manual details the responsibilities, methods and procedures for the operation and maintenance of the interconnection of the Systems. Details of contacts are given in the Customer Service Plan. 17.2 FAULT IDENTIFICATION AND REPORTING 17.2.1 Each Party will advise its Customers to report all faults to its fault reporting centre. 17.2.2 If a Party's Customer reports a fault to the fault reporting centre of the other Party, that Party will inform the Customer of the correct number to which to report the fault. 17.2.3 If a major fault occurs which affects both Parties' Systems, initial responsibility for identifying the fault rests with the Party who first becomes aware of the fault. 17.2.4 If a Party identifies a fault occurring in its System which may have an adverse effect on the other Party's System, the first Party shall promptly inform the other Party of the actions being taken to resolve the problem. 17.2.5 Each Party shall bear the costs of its own fault reporting centre. 17.3 SPEED OF RESPONSE The Parties shall develop and record in the Operations and Maintenance Manual, a series of agreed response times for different fault conditions, response time being the time from the reporting of the fault until remedial action begins. 17.4 SERVICE RESTORATION The service restoration procedures set out in the Operations and Maintenance Manual are based on the following: Page 33 of 81 95 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (1) service restoration shall take priority over the clearance of faults not affecting service unless it is agreed that a fault be treated as a lower priority; (2) the relevant Party shall automatically bring in available standby Capacity and/or carry out network management actions to restore service; (3) the relevant Party shall observe equipment alarms and carry out testing to identify the nature and location of the fault in co-operation with the other Party as necessary; (4) if possible, the relevant Party shall rectify the fault immediately, if not, the other Party must be notified and kept informed of progress on a regular basis; (5) if temporary repairs are made, the other Party must be informed and given the estimated timescale and service impact of full repair; and (6) priority shall be given by the relevant Party to faults with the highest service loss impact on the number of Customers or the volume of traffic affected. 17.5 RESTORATION TIMES AND PROCEDURE Indicative restoration times and procedures are set out in the Operations and Maintenance Manual. 17.6 PLANNED MAINTENANCE/WORKS 17.6.1 Each Party shall provide not less than 3 Working Days notice of any planned maintenance which may affect the other's System. Each Party shall use its reasonable endeavours to minimise disruption and where possible provide alternative routing at no charge to the other Party for a reasonable period of time with respect to the cause of the disruption. 17.6.2 If a Party reasonably considers that the interconnection arrangements are at risk and maintenance repair activity is essential, that Party shall give as much advance notice to the other Party as is reasonably practicable. 18. SERVICES 18.1 INTRODUCTION Page 34 of 81 96 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- This paragraph 18 sets out the technical requirements relating to the services provided in accordance with particular Schedules. 18.2 BT OPERATOR SERVICES The arrangements for routing Calls from the Operator System to the services listed below are via a BT Switch Connection at a BT Tandem Exchange. The digits forwarded from the Operator System to the BT System shall be those below together with the two identification digits appropriate to the Operator as network address digits. The Operator shall use the identification digits agreed with BT: Service Digits National Operator Assistance Service 100 Emergency Service 999 DQ Service 192 International Operator Assistance Service 155 IDQ Service 153 Blind or Disabled Service 195 each service being as defined in the appropriate Schedules. 18.3 CLI CLI shall be requested and provided in a manner consistent with the Generic C7 Signalling Interface Specification. However CLI is not available for Operator Basic International Incoming Calls or BT Basic International Outgoing Calls. 18.4 MALICIOUS CALL IDENTIFICATION Where a Party assists the police in identification of Calling Parties with malicious intent the Parties shall co-operate and when appropriate use CLI, such use being subject to paragraphs 11 and 21 of the main body of this Agreement. 18.5 EMERGENCY CALL ROUTING AND SIGNALLING The handing over of Emergency Calls to the BT System at agreed BT Tandem Exchanges is subject to the following conditions: (1) Trunk reservation, physical separation or other appropriate method shall ensure the availability of emergency circuits to carry Emergency Calls in the Interconnect Link; Page 35 of 81 97 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (2) The BT Switch Connection at the BT Tandem Exchange shall route Emergency Calls to the BT Operator. Alternative routing shall be applied by the BT System when required and where this alternative routing fails, the BT System shall return a terminal congestion indication to the Operator; (3) Where possible, the Operator System shall present the relevant BT Tandem Exchange with an Initial and Final Addressing Message ("IFAM") containing the protection bit set. Page 36 of 81 98 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX A BT/OPERATOR NETWORK INFORMATION 1. OPERATOR INFORMATION 1.1 Names and Addresses of all Operator Exchanges within the area covered by the BT System. 1.2 Address of each Operator building within the area covered by the BT System which is capable of supporting IECs. 2. OPERATOR NUMBERING INFORMATION 2.1 Number Ranges of Operator Exchanges within the area covered by the BT System and unless the Operator is only providing Land Mobile Radio Services (as defined in the BT Licence) the interconnectivity of and functionality provided by Operator Exchanges used for the conveyance of Calls pursuant to this Agreement. 3. BT INFORMATION 3.1 Names and addresses of BT ISCs. 3.2 Names and addresses of BT Tandem Exchanges 3.3 Names and addresses of BT DLTEs 3.4 Names and addresses of BT DLEs 3.5 Address of each BT building which is capable of supporting IECs. 4. BT NUMBERING INFORMATION 4.1 Number Ranges of BT DLEs, BT DLTEs, BT ALEs and of those exchanges which are connected by a BT DLE alone to the remainder of the BT System. 4.2 For each BT DLE, BT DLTE and BT ALE, the names of the BT Tandem Exchanges which are the Parent BT Exchanges. 4.3 For each BT DLE or BT ALE, where appropriate, the name of the BT DLTE. 5. BT/OPERATOR INFORMATION 5.1 Addresses of relevant ISI locations together with annotated Ordnance Survey map extracts. Page 37 of 81 99 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX B BT/OPERATOR INTERCONNECT INFORMATION 1. OPERATOR INFORMATION 1.1 Details of the Operator Exchange or Exchanges, software build levels and of relevant Operator Switch Connections nominated by the Operator. 1.2 Details of relevant BT Switch Connections nominated by the Operator. 1.3 Details of the relevant Schedules. 1.4 Number Ranges served by and that may be accessed via the Operator System. 1.5 A statement of the conformity of the Operator System to the Specifications. 1.6 Capacity Profile. 1.7 Traffic Forecasts. 1.8 Traffic Routes, by Number Ranges. 1.9 Details of proposed Points of Connection and Interconnect Links requested by the Operator. 1.10 Where the Operator intends to send Emergency Calls to the BT System, and the Operator Licensed Area is smaller than the geographic area covered by the BT System, the Operator shall provide BT with a map showing the boundary of the area from where Emergency Calls are to be sent to the BT System to a scale of approximately 1:50,000. 2. BT INFORMATION 2.1 Signalling and Testing requirements. 2.2 Details of relevant Operator Switch Connections and BT Switch Connections nominated by BT, if any. 2.3 Traffic Routes by Number Ranges if the Operator is using more than one Operator Switch Connection. Page 38 of 81 100 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX C COMMERCIAL 1. PRE-PAYMENT CHARGES 1.1 If either Party (the "Defaulting Party") in any ACO Period, places Capacity Orders on the other Party for less than the minimum Capacity specified pursuant to either paragraph 10.1.2 or 10.1.5 of Annex A, then the Defaulting Party shall pay to the other Party not later than 30 Working Days of the end of such ACO Period the prepayment charges calculated in accordance with paragraph 1.2 of this Appendix. 1.2 Prepayment charges are calculated in accordance with the following formula: A = ((80% x B)-C) x D Where: A is the prepayment charge payable; B is the aggregate Capacity Provision (by number of units 2Mbit/s Capacity) specified for the relevant ACO Period in the relevant Advance Capacity Order (not including if the Defaulting Party is the Operator, Capacity required for traffic handed over from the BT System); C the Capacity (by number of units of 2Mbit/s Capacity) ordered during such ACO Period not including cancellations of Capacity Orders made during or after the relevant ACO Period; D is half the Intrabuilding Link connection charge applicable for the ACO Period, as detailed in the Carrier Price List from time to time. 2. LIQUIDATED DAMAGES IN RESPECT OF TESTING CAPACITY 2.1 The liquidated damages referred to in paragraph 10.2.1(4) of Annex A shall be 1.5% of Intrabuilding Link connection charge specified from time to time in the Carrier Price List for each 2Mbit/s unit of Capacity which is subject of the relevant Capacity Order, multiplied by the number of Working Days calculated from a date 25 Working Days after the date on which the Capacity should have been Ready for Testing pursuant to paragraph 11 of Annex A, except that no liquidated damages shall be payable if the Purchaser causes a delay to the Ready for Service date by failing to complete the testing of the Capacity in the time period set out in paragraph 10.2.1(1) of Annex A. Page 39 of 81 101 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3. CANCELLATION CHARGES IN RESPECT OF LATE NOTIFICATION OF TESTING 3.1 If the notice by the Purchaser, pursuant to paragraph 10.2.1(2) of Annex A is given less than five Working Days before the scheduled Ready for Test Date, the Purchaser shall pay, on demand, a cancellation charge of 20% of the relevant connection charge, or charges, specified from time to time in the Carrier Price List and referred to in Schedule 01 or 130 as appropriate. 4. REMOVAL OF CAPACITY 4.1 If, pursuant to paragraph 11.2 of Annex A, Capacity is removed a proportion of the relevant connection charge shall be repaid to the Party requesting the removal. The amount to be repaid shall be: R = (0.466 x C) - (0.466 x C x Y) --------------- 10 where: R is the amount to be repaid C is the relevant connection charge referred to in Schedule 01 or 130 as appropriate and specified from time to time in the Carrier Price List Y is the number of years between the Ready for Test Date for the relevant Capacity and the date of the removal order rounded up to the next whole year. 5. ORDER AMENDMENT 5.1 The charge payable pursuant to paragraph 11.3.2 of Annex A shall be 50% of the difference between the connection charges specified from time to time in the Carrier Price List, for the originally ordered and the amended Capacity Order. 6. ORDER CANCELLATION 6.1 The charge payable pursuant to paragraph 11.5 of Annex A shall be 50% of the applicable connection charge specified from time to time in the Carrier Price List. Page 40 of 81 102 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX B BILLING AND PAYMENT INDEX 1 Definitions 2 Recording of Billing Information 3 Exchange of Billing Information 4 Invoices 5 Payment 6 Disputes 7 "TIBS" System Change Notification 1. DEFINITIONS 1.1 In this Annex, a reference to a paragraph, unless stated otherwise, is to a paragraph of this Annex. Words and expressions have the meaning given in Annex D. 2. RECORDING OF BILLING INFORMATION 2.1 Subject to paragraph 2.2, each Party shall for those Calls for which it is the Billing Party collect for each individual Call, record (whether in bulk or on an itemised Call basis) and process in accordance with paragraph 2.4 the Billing Information. 2.2 The Parties acknowledge that INCA or other Billing Systems may not be capable of collecting and/or recording and/or processing all types of Calls. BT or the Operator (as applicable) shall, as appropriate, collect (for each individual Call), record (whether in bulk or on an itemised Call basis) and process (in accordance with paragraph 2.4) Billing Information for the types of Call for which INCA or other Billing Systems are not operational and in respect of which the other Party is the Billing Party. 2.3 The types of Calls for which INCA or other Billing Systems are not operational are as described from time to time in the Billing Manual. 2.4 There shall be recorded for each Call for which there is an entry in the Carrier Price List the following: Page 41 of 81 103 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.4.1 Interconnect Link identifier (unless otherwise specified in the Billing Manual); and 2.4.2 the dialled digits and/or such other information as may be agreed; and 2.4.3 CLI (if available); and 2.4.4 the date and time when the Answer Signal is received by the Party providing the Billing Information; 2.4.5 Chargeable Call Duration (whether measured or derived). 2.5 The Billing Party shall provide with the invoice appropriate support Billing Information as described in the Billing Manual to enable the non-billing Party to validate the invoice. 3. EXCHANGE OF BILLING INFORMATION 3.1 The Billing Party shall process the information specified in paragraph 2.4 so as to produce such information (including, if applicable, the call segments listed from time to time in the Carrier Price List) by the applicable time of day/period in summary form and to complete and carry out in the following matrix comprising of generic Interconnect Usage Report as follows: Page 42 of 81 104 SUBJECT TO CONTRACT - --------------------------------------------------------------------------------
TABLE A.1 - ----------------- ---------------------------------------- ---------------------------------------- -------------------------- Call Type Daytime Evening Weekend - ----------------- ------------- ------------ ------------- ------------ ------------- ------------- ------------ ------------- as per Carrier Call# Duration Revenue Call# Duration Revenue Call# Duration Price List N(D) M(D) R(D) N(E) M(E) R(E) N(W) M(W) - ----------------- ------------- ------------ ------------- ------------ ------------- ------------- ------------ ------------- TOTAL (SIGMA)N(D) (SIGMA)M(D) (SIGMA)R(D) (SIGMA)N(E) (SIGMA)M(E) (SIGMA)R(E) (SIGMA)N(W) (SIGMA)M(W) - ----------------- ------------- ------------ ------------- ------------ ------------- ------------- ------------ -------------
Call Type Weekend Total - ------------------------------ ------------ ------------- ------------ as per Carrier Revenue Call# Duration Revenue Price List R(W) N M R - ------------------------------ ------------ ------------- ------------ TOTAL (SIGMA)R(W) (SIGMA)N (SIGMA)M (SIGMA)R - ------------------------------ ------------ ------------- ------------
or such other form of Interconnect Usage Report as the Parties may from time to time reasonably agree. Where: N = the total number of Calls and where R = N x F; or M = the total Chargeable Call Duration R = M x G; or F = appropriate rate per Call R = (N x F) + (M x G) G = appropriate rate per minute as appropriate in accordance with the Carrier Price List being the amount to be shown on the relevant invoice. for the relevant entry in the Carrier Price List.
Page 43 of 81 105 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.2 The Operator shall supply BT with Billing Information recorded by it pursuant to paragraph 2.2 not later than ten Working Days after the end of each Billing Period. Subject to receipt pursuant to paragraph 3.3.1 of the necessary TIBS Information (if any) from BT, the Operator shall, not later than ten Working Days after the end of each Billing Period, supply to BT the latest TIBS Billing Information and Refund Report. 3.3 BT shall supply the Operator with Billing Information as follows: 3.3.1 BT shall use its reasonable endeavours to supply to the Operator on average four times each week the latest TIBS Information and such other relevant information as may be agreed from time to time in writing. Without prejudice to any dispute resolution provision in this Agreement it is hereby acknowledged that TIBS Information shall be relied upon by the Operator to calculate charges payable by Operator Customers using the Operator System; 3.3.2 BT shall supply to the Operator the Carrier Chargeband Reference Data together with such other data as the Parties may agree. Such Carrier Chargeband Reference Data (including changes thereto) shall be supplied on a quarterly basis at such times as shall be agreed on public access Internet or by dial-up modem. 3.4 The Operator shall supply Billing Information in respect of the Operator System to BT such information, being the Operator's equivalent of the Billing Information contained in paragraph 3.3.2, to be supplied at such time and in such form as BT may reasonably require. All Billing Information provided under paragraphs 3.2 to 3.4 shall be sent by such means as are described in the Billing Manual. 3.5 The Operator shall process the TIBS Information as soon as practicable. If the Operator asks questions about the TIBS Information, it shall use its reasonable endeavours to do so as soon as practicable after receipt of the tapes or receipt by electronic transfer, as applicable. The Operator shall return tapes (if any) to BT when the TIBS Information has been processed. 3.6 The Parties acknowledge that the primary method of exchanging Billing Information is the completion by the Billing Party of the appropriate Interconnect Usage Report and the sending of such reports (or a summary thereof) to the other Party. 3.7 The Billing Party shall store Billing Information in such summary format and in such amounts as shall be sufficient to recalculate the amounts due from one Party to the other to take account of changes in the relevant entries of the Carrier Price List. Page 44 of 81 106 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.8 If the System or the Billing System of either Party malfunctions and fails to provide all of the Billing Information necessary for the Billing Party to prepare an invoice, the other Party shall at the request and reasonable expense of the Billing Party use its reasonable endeavours to supply the missing Billing Information to the Billing Party. There shall be no legal liability on the Billing Party for the preparation of an incorrect invoice resulting from inaccuracies in such Billing Information provided by the other Party to the Billing Party. The Parties acknowledge that Billing Information supplied by the other Party pursuant to this paragraph shall have been supplied via a verification system (rather than a Billing System) and such other Party cannot warrant that the information is free of error. 3.9 If the Parties' monitoring of their respective Billing Information indicates a persistent inconsistency in reconciling Billing Information provided by the Parties' respective Billing Systems, the Parties shall use their reasonable endeavours to ascertain the cause of such inconsistency, including, subject to the Parties agreement, the reference of the matter for investigation and resolution by such appropriate independent consultant as the Parties may agree, or in default of agreement, as may be nominated by the President of the Institute of Chartered Accountants in England and Wales. Such independent consultant shall act as an expert and not as arbitrator and whose decision, in the absence of manifest error, shall be final and binding. The Parties shall co-operate in such investigation. The independent consultant's costs for such investigation shall be paid by the Parties in such proportions as the independent consultant shall decide. 3.10 The Operator shall provide as part of the Billing Information, information to identify the origin, type and destination of Calls in sufficient detail to enable the calculation of BT's Access Deficit. For each Call handed over to the Operator System by a Third Party Operator's system, the Operator shall use its reasonable endeavours to identify the Third Party Operator. 3.11 Save as may be otherwise provided in a Schedule, charges shall not be payable under this Agreement by either Party to the other for the conveyance of a Call if the Call is not connected when there is a "ring" tone with no reply, an "engaged" tone or "number unobtainable" tone. 3.12 For the avoidance of doubt, if a Chargeable Call Duration extends over 2 or more charge rate periods the Call shall be recorded as a single Call in the charge rate period applying at the commencement of the Call and the Chargeable Call Duration shall be apportioned and recorded in each of the charge rate periods applicable to that Call. 4. INVOICES 4.1 At the end of each Billing Period the Billing Party shall use its reasonable endeavours to submit to the other Party, within a reasonable time, invoices Page 45 of 81 107 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- for charges for Calls (including, without limitation, the Access Deficit Contribution) and other services for which the Billing Party is entitled to charge the other Party during such Billing Period. 4.2 Following the end of each Billing Period and provided that the relevant Billing Information has been supplied in accordance with paragraph 3: 4.2.1 the Operator shall use its reasonable endeavours to submit to BT invoices for charges for Calls and other services for which the Operator is entitled to charge BT during such Billing Period; and 4.2.2 BT shall use its reasonable endeavours to submit to the Operator invoices for charges for services provided to the Operator by BT (being services the subject of TIBS Billing Information and Refund Reports) during such Billing Period and save for international Transfer Charge Calls (to the extent not previously invoiced) the two immediately preceding Billing Periods; 4.2.3 for international Transfer Charge Calls the provisions of paragraph 4.2.2 shall apply save that subject to the provisions of 4.2.4 BT shall submit an invoice for an international Transfer Charge Call not later than 10 months from the date of such a Call; 4.2.4 BT shall use its reasonable endeavours to notify in writing the Operator of any notification which BT has received from an Authorised Overseas System, as a result of which notification, BT reasonably expects that BT would not be capable of submitting invoices for international Transfer Charge Calls within the period specified in paragraph 4.2.3. Any such notification to be sent to the Operator by BT shall be given not later than 6 months from the date of the relevant international Charge Calls. If such notification is given, BT may submit an invoice after 10 months from the date of the relevant international Transfer Charge Call. 4.3 All charges payable under this Agreement shall be calculated in accordance with this Agreement and at the rates specified from time to time in the Carrier Price List. Invoices for charges shall be invoiced and paid for in accordance with paragraphs 14 and 15 of the main body of this Agreement together with the relevant Schedule and the Carrier Price List, as appropriate. Detailed invoicing procedures are described in the Billing Manual. 4.4 For the avoidance of doubt, an invoice (including an invoice based on estimated information) shall be dated as of the date of despatch of that invoice. Page 46 of 81 108 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.5 For services (other than Calls) the Billing Party shall provide with the invoice appropriate Billing Information as described in the Billing Manual to enable the non-billing Party to accurately process the invoice for such services. Detailed invoicing procedures are described in the Billing Manual. 4.6 If the Operator fails to supply to BT pursuant to paragraph 2 or paragraph 3.2 Billing Information necessary for BT to deliver an invoice under paragraph 4.2.2 (other than due to an act or omission of BT) the following provisions shall apply: 4.6.1 BT may deliver an invoice ("estimated invoice") for an amount due to BT for such period, such amount being equal to the relevant amount contained in BT's invoice for the immediately preceding Billing Period as increased for decreased by the Relevant Percentage. For the purpose of this paragraph "Relevant Percentage" means the percentage increase or decrease in the aggregate amounts due to BT under this Agreement over the last two months for which Billing Information shall have been supplied by the Operator in accordance with paragraphs 2 or 3.2. 4.6.2 Following the supply by the Operator of the necessary Billing Information relating to the Billing Period for which an estimated invoice has been delivered to BT the amounts due to BT in respect of any subsequent invoice(s) submitted to the Operator shall be adjusted accordingly by the amount over or under paid by the Operator in respect of the estimated invoice, save to the extent already paid or refunded: 4.6.3 Any payment due to BT (or any refund due to the Operator) as appropriate shall be made pursuant to paragraph 4.6.2 together with interest on such additional payment or refund, such interest calculated at the Default Interest Rate as at the date being 30 calendar days from the date of despatch of the estimated invoice. Such interest shall be payable (in the case of an additional payment due) from and including the day after the Due Date, or (in the case of a refund) the later of the date of payment of the original amount to be refunded and the Due Date, in each case ending on the date of payment or, as the case may be, the date of refund in full. Such interest shall accrue from day to day and shall not be compounded. 4.7 A calculation of interest at the Oftel Interest Rate shall be calculated on a daily basis from and including the date of payment of the original amount to be adjusted up to and including the date on which the adjusted amount is paid. 5. PAYMENT Page 47 of 81 109 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.1 Subject as stated below, all charges due by one Party to the other under this Agreement shall be payable by the Due Date. 5.2 If, pursuant to paragraph 6.1, either Party shall have notified the other of a dispute relating to such invoice and such dispute shall not have been resolved before the Due Date, and if the amount in dispute represents: 5.2.1 less than 5 per cent. of the total amount (excluding VAT) of the relevant invoice, the total amount invoiced; or 5.2.2 5 per cent. or more of the total amount (excluding VAT) of the relevant invoice, the amount in dispute may be withheld until the dispute is resolved and the balance; shall be due and payable on the Due Date. 5.3 Notwithstanding notification of a dispute pursuant to paragraphs 6.1 or 6.5, if a Party fails to pay on the Due Date any amount due under this Agreement or shall overpay any amount, the payee or, as the case may be (subject to paragraph 5.5) the over-payer, shall pay or be paid interest at the Default Interest Rate as at the Due Date or date of the overpayment in respect of any such amount outstanding. 5.4 Interest at the Default Interest Rate shall be payable (for late payment) from and including the day after the Due Date or (in the case of a refund) the later of the date of payment of the original amount to be refunded and the Due Date, in each case ending on the date of payment or, as the case may be, refund in full. Such interest at the Default Interest Rate shall accrue day by day and shall not be compounded. 5.5 If such overpayment results from information provided by the overpayer (which is not attributable to information provided by the payee Party), the payee Party shall be under no obligation to pay any interest at the Default Interest Rate on the amount overpaid. 5.6 If a recalculation and adjustment is required pursuant to paragraphs 12 or 13 of the main body of this Agreement, the amount of such adjustment together with interest calculated at the Oftel Interest Rate shall be calculated and paid accordingly. 5.7 Without prejudice to the provisions of paragraphs 5.1 to 5.5 (inclusive) a Party shall pay pursuant to paragraph 5.6 to the other the amount of the adjustment together with interest calculated at the Oftel Interest Rate calculated from the Due Date to the date on which the adjustment is paid (both dates inclusive). Page 48 of 81 110 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.8 VAT shall be added to all or any part of the charges under this Agreement and shall be paid by the Party responsible for making such payment. 6. DISPUTES 6.1 Each Party shall use its reasonable endeavours to resolve disputes with the other. If either Party ("the disputing Party") disputes the accuracy of an invoice delivered under this Agreement the disputing Party shall, as soon as practicable, notify in writing the other Party's billing liaison contact of the nature and extent of the problem. If the problem remains unresolved on the last but one Working Day before the date when the relevant invoice is due for payment, the disputing Party may invoke the formal billing dispute procedures set out in paragraph 6.2 by written notification to the other, such notification to be given not later than five Working Days after the Due Date of the relevant invoice. The disputing Party shall include with such notice all details reasonably necessary to substantiate its claim, which details shall be reasonably capable of being verified by the other Party. 6.2 Following a notification made under paragraph 6.1 that either Party wishes to invoke the formal billing dispute procedures, the Parties shall consult and endeavour to resolve the dispute at level 1 of consultation and if agreement cannot be reached within 15 Working Days, shall escalate the disagreement to level 2. If agreement cannot be reached within 10 Working Days at level 2, the matter shall be escalated to level 3. Each Party shall inform the other in writing of the name of its representative at each level of consultation. Subject to paragraph 6.7, each Party shall use the above dispute resolution procedure for any dispute under this Annex to the fullest extent to try to resolve such dispute. The Parties may agree in writing to extend the above timescales. 6.3 Notwithstanding the provisions of paragraph 6.1, if the Parties fail to resolve any dispute either, in not less than two months (for a dispute notified pursuant to paragraph 6.2), or, in not less than three months (for a dispute notified pursuant to paragraph 6.5) in each case from the Due Date of the relevant disputed invoice (or such extended period as the Parties may agree) either Party may (by written notice to the other to such effect) refer the dispute for investigation and resolution by such chartered accountants as the Parties may agree, or in default of agreement, as may be nominated by the President of the Institute of Chartered Accountants in England and Wales. Such chartered accountants shall act as an expert and not as arbitrator and whose decision, in the absence of evidence of manifest error, shall be final and binding. The Parties shall co-operate in such investigation and, if any sums are found to be due or overpaid in respect of the disputed invoice such sum shall be paid or refunded (with interest payable or paid pursuant to paragraph 5.3), as the case may be, within 10 Working Days from the date of resolution or earlier settlement between the Parties. Page 49 of 81 111 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 6.4 The costs of the chartered accountant agreed or nominated pursuant to paragraph 6.3 shall be paid by the disputing Party unless the relevant invoice is established to have been incorrect by more than the lesser of (a) 5 per cent. of the total amount of the charges (excluding VAT) specified in the invoice and (b) (pound)5,000 (excluding VAT), when the Billing Party shall pay such costs. 6.5 Notwithstanding the provisions of paragraph 6.1 a Party may by written notice raise a dispute regarding any invoice delivered under this Agreement at any time following five Working Days after the Due Date, save that no such notice shall be given more than 12 months after the date of the relevant invoice. If notice under this paragraph 6.5 is given after the latest date for giving notice specified in paragraph 6.1, the preceding provisions of this paragraph 6 shall apply mutatis mutandis, save that in paragraph 6.2 in relation to the number of Working Days "15" and "10" shall be substituted by "30" and "20", respectively. 6.6 The above procedures are without prejudice to any other rights and remedies that may be available in respect of any breach of any provision of this Agreement. 6.7 Though it is the good faith intention of the Parties to use the above dispute resolution procedures to the fullest extent to try to resolve such a dispute, nothing in this Annex shall prevent either Party seeking, obtaining or implementing interlocutory or other immediate relief in respect of any dispute or referring, in accordance with any right it may have under the other Party's Licence or its Licence, any matter relating to this Annex or any dispute arising in relation to this Annex, to the Director General requesting him to make a determination or take other appropriate steps for its resolution. 7. "TIBS" SYSTEM CHANGE NOTIFICATION 7.1 BT shall notify the Operator by giving not less than 6 months written notice if BT is proposing a replacement of, or fundamental change in TIBS. Page 50 of 81 112 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX D DEFINITIONS In this Agreement, words and expressions have the following meanings: "ACCESS CODE" a three or four digit code or a number commencing with the digits 0800 followed by a six or seven digit number which initiates an Indirect Access Call; "ACCESS DEFICIT CONTRIBUTION" the contribution to the funding of the BT Access Deficit payable by the Operator to BT pursuant to Condition 13.5A.3 and assessed in accordance with Condition 13.5A.4 both being Conditions of the BT Licence; "ACO PERIOD" the period covered by an Advance Capacity Order; "ACT" Telecommunications Act 1984; "ACTUAL CHARGE" the charge (or the means of calculating that charge) for a Standard Service paid by a Network Provider to BT in respect of the whole or part of the Financial Year In Question which is less than the Interim Charge (whether as a result of the operation of Condition 24F or following the consent of the Director General to that lesser charge pursuant to Condition 16B.5 being Conditions of the BT Licence); "ADDRESS COMPLETE MESSAGE" a signalling message required by the originating System to indicate that sufficient address digits have been received and that a transmission path should be set up; "ADVANCE CAPACITY ORDER" that part of the Capacity Profile which sets out the Capacity ordering intentions of the relevant Party over the first four months of the Capacity Profile and has the contractual consequences outlined in Annex A; Page 51 of 81 113 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "AFN" the first three digits immediately after a Director Area Number; "AGREEMENT" this agreement, the Carrier Price List, the Annexes, Schedules, Appendices and Specifications; "ANCILLARY SERVICE" (a) a service which does not solely comprise the conveyance of Calls; or (b) a Call, except a Transfer Charge Call, where the Calling Party is not required to pay all of the charges associated with that Call; or (c) a Call where the Calling Party is charged at a rate which includes an element over and above the charge for conveyance of that Call; "ANNEX" annex A, B, C or D attached to this Agreement; "ANSWER SIGNAL" the signal required by the originating network to indicate that the transmission path is complete; "APPENDIX" an appendix to a Schedule in Annex C; "APPROVED AUDITOR" a Party's auditor appointed in accordance with the Companies Act 1985 or such firm of chartered accountants which a Party may (subject to the other Party's written approval) appoint (such approval not to be unreasonably withheld or delayed); "ASR" the Answer Seize Ratio expressed as a percentage of Calls, which were successfully switched and which received an answer, compared to Call attempts, during a particular measurement period; "ASSOCIATED COMPANY" in relation to a Party:- Page 52 of 81 114 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) its Subsidiary or Holding Company of that Party or another Subsidiary of such Holding Company; or (b) an associated company (as defined in Statement of Standard Accounting Practice No. 1 issued by the Institute of Chartered Accountants in England and Wales) of that Party's Holding Company; "AUTHORISED OVERSEAS SYSTEM" has the meaning in schedule 1 part 1 of the BT Licence as in force at the date of this Agreement; "BILLING INFORMATION" such information provided pursuant to Annex B by one Party to the other including, without limitation: (a) such information as is necessary to ascertain the charges payable by each Party under this Agreement; and (b) Interconnect Usage Reports, TIBS Billing Information and Refund Reports, information provided by INCA, and by the Operator's equivalent of TIBS and/or INCA; "BILLING PARTY" the Party to whom charges are payable by the other Party pursuant to this Agreement; "BILLING PERIOD" unless otherwise agreed in writing, the period of a calendar month commencing on the first day of a month; "BILLING SYSTEM" a system to collate Billing Information and prepare invoices relating to charges payable by each Party under this Agreement; "BRITISH ISLES" United Kingdom, Channel Islands, Isle of Man and Republic of Ireland; "BT" British Telecommunications public limited company; Page 53 of 81 115 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT'S ACCESS DEFICIT" has the meaning given to Access Deficit in Condition 13.5A.3 of the BT Licence as in force at the date of this Agreement; "BT ANALOGUE LOCAL EXCHANGE" a TXE 4 or TXE 4A analogue local Switch in OR "BT ALE" the BT System; "BT BASIC INTERNATIONAL INCOMING a Call, received by the Operator System from CALL" an Authorised Overseas System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; "BT BASIC INTERNATIONAL OUTGOING a Call, destined for an Authorised Overseas CALL" System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "BT BASIC OPERATOR TO OPERATOR a Call comprising the minimum service TRANSIT CALL" features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System destined for the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "BT BASIC TELEPHONY CALL" a Call, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; Page 54 of 81 116 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT BASIC TRANSIT CALL" a Call comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System destined for a Third Party Operator's system, being a Call available for the conveyance of Messages; "BT CHARGE GROUP" a geographical area designated from time to time by BT, and used for retail charges as specified in the BT Retail Price List; BT DIGITAL LOCAL EXCHANGE" OR "BT DLE" a digital Switch in the BT System which Switch connects by that Switch alone Calls from analogue exchanges, RCUs or Exchange Lines; "BT DJSU" a digital tandem Switch in the London Director Area (currently known as a Digital Junction Switching Unit) in the BT System which provides access to certain BT Digital Local Exchanges, BT DLTEs, BT ALEs and/or other BT DJSUs in such Director Area and adjacent BT Charge Groups; "BT DLTE" a digital Switch in the BT System which Switch connects by that Switch alone Calls from analogue exchanges, RCUs or Exchange Lines and which provides access to directly connected BT Digital Local Exchanges and directly connected BT ALEs; "BT DMSU" a digital tandem Switch (currently known as a Digital Main Switching Unit) in the BT System, which provides access to other BT Exchanges; "BT EXCHANGE" a BT Analogue Local Exchange, a BT Digital Local Exchange, a BT DLTE, a BT Tandem Exchange or a BT ISC and such other Switch which the Parties may from time to time agree is a BT Exchange; Page 55 of 81 117 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT INTERNATIONAL INCOMING CALL" either a BT Basic International Incoming Call or a BT ISDN International Incoming Call; "BT INTERNATIONAL OUTGOING CALL" either a BT Basic International Outgoing Call or a BT ISDN International Outgoing Call; "BT ISC" a BT Exchange notified to the Operator pursuant to paragraph 3.1.1 of Annex A which is used exclusively for switching Calls to, or received from Authorised Overseas Systems; "BT ISDN INTERNATIONAL INCOMING CALL" a Call, received by the Operator System from an Authorised Overseas System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; "BT ISDN INTERNATIONAL OUTGOING CALL" a Call, destined for an Authorised Overseas System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "BT ISDN OPERATOR TO OPERATOR TRANSIT CALL" a Call comprising service features additional to the minimum features Page 56 of 81 118 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "BT ISDN TELEPHONY CALL" a Call, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; "BT ISDN TRANSIT CALL" a Call comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for a Third Party Operator's system, being a Call available for the conveyance of Messages; "BT LICENCE" the licence granted to BT pursuant to section 7 of the Act under which BT runs the BT System; "BT OPERATOR" a person who answers Calls for directory or operator assistance, Emergency Calls and other similar Calls for BT; Page 57 of 81 119 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT OPERATOR TO OPERATOR TRANSIT CALL" either a BT Basic Operator to Operator Transit Call or a BT ISDN Operator to Operator Transit Call; "BT PAYPHONE ACCESS LEVY" the charge payable by the Operator for the use of a BT Public Call Box or a BT Temporary Call Box (each as defined in Condition 11 of the BT Licence) to originate a Call. "BT PRS CALL" a Call to a PRS: (a) for which if such Call originated on the BT System, the person responsible for payment would pay a charge higher than that which would apply to a directly dialled BT Telephony Call of equivalent distance and duration; and (b) where payment is made by BT to a BT PRS Service Provider and where payment takes into account the number or duration of Calls to that BT PRS Service Provider; "BT PRS SERVICE PROVIDER" a person having a contract with BT for the delivery of BT PRS Calls; "BT PRS SUB SERVICE PROVIDER" a person having an arrangement for the delivery of BT PRS Calls, whether or not legally binding, with a BT PRS Service Provider; "BT RETAIL PRICE LIST" the retail price list published by BT from time to time pursuant to Condition 16 of the BT Licence; "BT SWITCH CONNECTION" a BT Exchange at which Calls handed over: (a) from the Operator System are initially switched; or Page 58 of 81 120 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (b) to the Operator System are finally switched; by BT; "BT SYSTEM" the applicable system described in Annex A of the BT Licence as in force at the date of this Agreement; "BT TANDEM EXCHANGE" a BT DMSU or a BT DJSU; "BT TELEMESSAGE" has the meaning given to the term "Telemessage" in the BT Retail Price List; "BT TELEPHONY CALL" either a BT Basic Telephony Call or a BT ISDN Telephony Call; "BT TRANSIT CALL" either a BT Basic Transit Call or a BT ISDN Transit Call; "CALL" a transmission path through Telecommunication Systems for the sending of Messages, and a reference to conveyance of a Call by a Party means the establishment by that Party of a transmission path through that Party's System and the conveyance by that Party in accordance with this Agreement of a Message (if any) over such transmission path; "CALLED PARTY" a person who receives a Call; "CALLING PARTY" a person who initiates a Call; "CAPACITY" capacity in units of 2 Mbit/s on Interconnect Links; "CAPACITY ORDER" an order for Capacity placed by one Party on the other, pursuant to Annex A; "CAPACITY PROFILE" a profile of future Capacity ordering intentions over a 12 month period as presented by one Party to the other pursuant to Annex A; "CAPACITY PROVISION" the provision of new or additional Capacity; Page 59 of 81 121 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "CAPACITY RE-ARRANGEMENT" the re-use of Capacity previously provided by one Party to the other, where, in each case, the Point of Connection and the buildings containing the Switch Connections remain the same; "CARRIER PRICE LIST" the price list having that name which contains charges for Standard Services consistent with the full list of Standard Services maintained by BT pursuant to Condition 16B.8 of the BT Licence, charges for services provided by the Operator and some other charges and information; "CARRIER CHARGE BAND REFERENCE DATA" such reference data (including EBC matrix, complementary retail file and associated files) as BT shall from time to time make available to the Operator, being data for the preparation and validation of Billing Information for Calls; "CHARGEABLE CALL" a Call for which a charge is made pursuant to this Agreement; "CHARGEABLE CALL DURATION" the duration of a Chargeable Call measured: (a) for a Call (other than an International Call), to the nearest second (or such greater accuracy as the Parties may agree in writing); (b) for an International Call to not less than the nearest second; commencing with the receipt of an Answer Signal and ceasing with the receipt of a Release Signal at the point of recording by the Party recording the relevant Billing Information; "CLI" has the meaning given to Calling Line Identification in the draft "Code of Practice for Network Operators in relation to Calling Line Identification Display Services and other Related Services" Version 6 dated 16 Page 60 of 81 122 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- November 1994 as the same may be amended or replaced from time to time; "COMPETITIVE STANDARD SERVICE" a Standard Service the market for which is determined by the Director General to be competitive pursuant to Condition 16B.6 of the BT Licence; "CONDITION" a condition of the BT Licence or the Operator Licence as the case may be as in force at the date of this Agreement, unless otherwise stated; "CONFIDENTIAL INFORMATION" any information, in whatever form, which in the case of written or electronic information is clearly designated as confidential and which, in the case of information disclosed orally, is identified at the time of disclosure as being confidential or is by its nature confidential and including such Confidential Information already disclosed by either Party to the other prior to the date of this Agreement but excluding any information which: (a) is in or comes into the public domain other than by reason of a breach of this Agreement; or (b) is previously known on a non-confidential basis to the Receiving Party at the time of its receipt; or (c) is independently generated, developed or discovered at any time by or for the Receiving Party; or (d) is subsequently received from a Third Party without any restriction on disclosure; "CONVEYANCE STANDARD SERVICE" a Standard Service the charge for which may be determined pursuant to Condition 13.5A of the BT Licence; "CUSTOMER" as the context requires: Page 61 of 81 123 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) a person having a contract with either or both Parties for the provision of telecommunication services by means of that Party's System; or (b) a user of telecommunication apparatus directly connected to the BT System or the Operator System; or (c) a person having a contract with a reseller of telecommunication services to be provided by means of either the BT System or the Operator System or a user of telecommunication apparatus authorised by that person; "CUSTOMER SITED INTERCONNECT" an Interconnect Link provided pursuant to Schedule 130 of Annex C; "CUSTOMER SERVICE PLAN" a document containing details of individuals, addresses and telephone numbers for ordering or maintenance of the services provided pursuant to this Agreement; "D" the first digit immediately following the NNG; "DATA MANAGEMENT AMENDMENT" such reconfiguration of the BT System or the Operator System as is necessary for access, routing and charging of Calls; "DAYTIME" the period of time between 0800 and 1800 on Monday to Friday or such other period of time as shall be agreed between the Parties; "DE" the first two digits immediately following the NNG; "DEFAULT INTEREST RATE" four per cent (4%) above the rate per annum as displayed on the "LIBP" page (or such other page whatever its designation on which London Inter-Bank Offered Rates of major banks for three months sterling Page 62 of 81 124 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- deposits are for the time being displayed) on the Reuters Monitor Money Rates Services provided that if the offered rates of less than two banks are so displayed then "LIBOR" shall be the arithmetic mean as determined by the Party charging interest of the offered quotations of two leading clearing banks in London, selected by such Party for three months sterling deposits. Such interest shall be calculated on a daily basis; "DIRECTOR AREA" an area comprising certain major United Kingdom conurbations which area is delimited by a Director Area Number; "DIRECTOR AREA NUMBER" the code (excluding the leading zero) comprising 3 digits for telephone numbers in certain major United Kingdom conurbations; "DIRECTOR GENERAL" the Director General of Telecommunications; "DISCLOSING PARTY" a Party disclosing information to the other Party; "DISPUTE" a disagreement between the Parties excluding breaches of this Agreement; "DUE DATE" a date which is 30 calendar days after the date of an invoice; "E" the first digit immediately following the D; "EFFECTIVE DATE" a date referred to by that name in the Carrier Price List or in a Schedule being the date on which a charge or a variation of a charge referred to in the Carrier Price List or a Schedule takes effect; "EMERGENCY CALL" a 999 or 112 Call handed over from the Operator System to the BT System; "EMERGENCY CENTRE" premises where BT Operators answer Emergency Calls; Page 63 of 81 125 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "EMERGENCY ORGANISATION" the relevant local public police, fire, ambulance and coastguard services and other similar organisation providing assistance to the public in emergencies; "ETSI" the European Telecommunications Standards Institute; "EVENING" periods of time not being either Daytime or Weekend or such other period of time as shall be agreed between the Parties; "EXCHANGE LINE" has the meaning in schedule 1 part 1 of the BT Licence as in force at the date of this Agreement; "FINAL CHARGE" in the case of charges payable to BT the charge (or the means of calculating that charge) for a Standard Service (other than a Competitive Standard Service) for each Financial Year In Question recalculated and redetermined by the Director General based on the Financial Statement for the Financial Year In Question in accordance with Condition 13.5A.3B or 13.5C.6 of the BT Licence; and in the case of charges payable to the Operator the charge (or the means of calculating that charge) for a service provided by the Operator to BT for each Financial Year In Question agreed between the Parties in writing or determined by the Director General based on the audited figures relating to that service for the relevant year or, if those figures are not available, the most recent audited figures which are available or, if no audited figures are available the best information available to the Director General in accordance with Condition 13.5B.1A of the BT Licence; "FINANCIAL STATEMENT" has the meaning in Condition 20B of the BT Licence; "FINANCIAL YEAR" a period of one year used for accounting purposes; Page 64 of 81 126 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "FINANCIAL YEAR IN QUESTION" a period of one year ending each 31 March in respect of which a charge is payable for services provided during that year; "FORECAST" unless otherwise specified, has the meaning in Condition 13.5A.3A of the BT Licence; "FRBS STATEMENT" has the meaning in Condition 13.5A.3C (b) of the BT Licence; "FULLY PROVIDED" Capacity on a Traffic Route which will carry all the relevant Traffic Streams at the planned grade of service; "G703 INTERFACE" an interface meeting the requirements of ITU-T Recommendation G703 (Geneva 1991); "GENERIC ELECTRICAL AND PHYSICAL INTERFACE SPECIFICATION" BT's Generic Electrical and Physical Interface Specification, as amended or substituted from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 or 3.3 of Annex A; "GENERIC SDH INTERFACE SPECIFICATION" BT's Generic Synchronous Digital Hierarchy Interface Specification, as amended or substituted from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 and 3.3 of Annex A; "GENERIC C7 SIGNALLING INTERFACE SPECIFICATION" BT's Generic C7 Signalling Interface Specification, as amended or substituted from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 or 3.3 of Annex A; "GENERIC TRANSMISSION INTERFACE SPECIFICATION" BT's Generic Transmission Interface Specification, as amended or substituted Page 65 of 81 127 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 or 3.3 of Annex A; "GSM" Global System for Mobile Communications; "HOLDING COMPANY" has the meaning in sections 736 and 736A of the Companies Act 1985; "INCA" BT's Inter Network Call Accounting System as the same may be developed from time to time; "INCOMING CALLS" Calls handed over at a Point of Connection by BT to the Operator other than Indirect Access Calls; "INDIRECT ACCESS CALL" a Call where a Calling Party on one Party's System has chosen to convey that Call to the other Party's System by prefixing that Call with an Access Code; "IN-SPAN INTERCONNECT" an Interconnect Link provided pursuant to Schedule 01; "INTELLECTUAL PROPERTY RIGHTS" any patent, petty patent, registered design, registered trade or service mark, copyright, design right, semi-conductor topography right, know-how or any similar right exercisable in any part of the world including any application therefor; "INTERCONNECT EXTENSION CIRCUIT" OR "IEC" a Link, being part of a 2Mbit/s ISI Interconnect Link, between the Muliplexor in a Remote Switch Connection and the Multiplexor terminating the ISI Interconnect Link; "INTERCONNECT LINK" a Link connecting a BT Switch Connection and an Operator Switch Connection passing through a Point of Connection; Page 66 of 81 128 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "INTERCONNECT USAGE REPORT" a report in the same or substantially the same form as specified in the Billing Manual; "INTERIM CHARGE" in the case charges payable to BT the charge (or the means of calculating that charge) for a Standard Service (other than a Competitive Standard Service) for each Financial Year In Question determined by the Director General in accordance with Condition 13.5A.3A or 13.5C.6 of the BT Licence; and in the case of charges payable to the Operator the charge (or the means of calculating that charge) for a service provided by the Operator to BT for each Financial Year In Question agreed between the Parties in writing or determined by the Director General in accordance with Condition 13.5B.1A of the BT Licence; "INTERNATIONAL CALL" a Call received by the BT System from: (a) an Authorised Overseas System; or (b) the Operator System destined for an Authorised Overseas System; or a Call received by the Operator System from: (a) an Authorised Overseas System, or (b) the BT System destined for an Authorised Overseas System; "INTRABUILDING LINK" a connection between a BT or an Operator Switch Connection and the G703 Interface on the Multiplexor forming part of an Interconnect Link; "INVOICE DATE" the date on which an invoice is despatched; "ISI INTERCONNECT LINK" a portion of an Interconnect Link being that cable (or fibres within that cable) and LTE's between an Operator building and a BT building over which a number of Page 67 of 81 129 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2Mbit/s ISI Interconnect Links are provided; "ITU-T" the Telecommunications Standards Bureau (formerly the International Telegraph and Telephone Consultative Committee) of the International Telecommunications Union; "LAND MOBILE RADIO SERVICE" has the meaning in Condition 18 of the BT Licence; "LICENCE" the BT Licence or, as the context requires, the Operator Licence; "LINK" telecommunication apparatus (which has the meaning in paragraph 1 (1) of schedule 2 to the Act as in force at the date of this Agreement) necessary to establish one or more transmission paths; "MANUAL" manual referred to in this Agreement of working practices between the Parties; "MESSAGE" has the meaning in schedule 1, part 1 of the BT Licence as in force at the date of this Agreement; "MOBILE CALL" a Call to an Operator Customer using a mobile handset if the Operator Customer using mobile terminal apparatus would receive that Call by means of wireless telegraphy if the handset was switched on and within range of a base transceiver station forming part of the Operator System unless: (a) the Operator Customer on a temporary basis has chosen to divert that Call to another number; or (b) the Operator System when the mobile handset is turned off or out of range from a base transceiver station returns a message to that effect to the Calling Party; Page 68 of 81 130 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "MULTIPLEXOR" the multiplexing equipment which serves an Intrabuilding Link and where appropriate an IEC; "NETWORK PROVIDER" in relation to each Standard Service, any person who has required it, and with whom BT is obliged to enter into an agreement to provide that Standard Service under Condition 13 of the BT Licence; "NETWORK TERMINATION POINT" has the meaning in schedule 1 part 1 of the BT Licence as in force at the date of this Agreement; "NEW CHARGE" a charge for a Standard Service, which is less than the charge for that Standard Service as determined by the Director General pursuant to Condition 13, following the consent of the Director General pursuant to Condition 16B.5 both being Conditions of the BT Licence; "NICC" Network Interoperability Consultative Committee; "NNG" a national number group being the code (excluding the leading zero) comprising for UK telephone numbers (a) for geographical numbers (excluding Director Area Number,) four digits (b) for non-geographic numbers, three digits; "NON CONVEYANCE STANDARD SERVICE" a Standard Service which is not a Conveyance Standard Service; "NUMBER RANGE" Director Area Number, NNG, AFN, D, E, and/or DE as appropriate; "NUMBER TRANSLATION SERVICES CALL" a Call to non-geographic telephone numbers (other than a Calls destined for a mobile handset) if the Party receiving the Call translates the dialled digits and routes the Call in accordance with such translation, including without limitation, PRS Calls, Local Call Fee Access Services Calls, Freephone Calls, National Call Services Calls and other specially charged services; Page 69 of 81 131 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "OCHC" an operator Call handling centre which routes Calls to BT Operators from Customers seeking assistance with connection to another telephone number; "OFTEL INTEREST RATE" three eighths of one per cent (3/8%) above the London Inter Bank Offered Rate being the rate per annum of the offered quotation for sterling deposits for delivery on the due date for payment for a period of three months as displayed on page 3750 on the Telerate Service (or any other page that may replace page 3750 on that service) at or about 11 am London time on the due date of payment provided that if such a rate is not so displayed London Inter Bank Offered Rate shall mean the rate quoted by National Westminster Bank PLC to leading banks in the London interbank market at or about 11 am London time on the due date of payment for the offering of sterling deposits of a comparable amount for a period of three months. Such interest shall be calculated on a daily basis; "OPERATOR" the other Party to this Agreement; "OPERATOR BASIC BT TO BT TRANSIT CALL" a Call comprising the minimum service features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System destined for the BT System, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "OPERATOR BASIC INTERNATIONAL INCOMING CALL" a Call, received by the BT System from an Authorised Overseas System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from BT System to the Operator System destined for a telephone number of an Operator Network Termination Point, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of messages; "OPERATOR BASIC INTERNATIONAL OUTGOING CALL" a Call, destined for an Authorised Overseas System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System, if a rate for such a Call is specified from time to time in the Carrier Page 70 of 81 132 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Price List, being a Call available for the conveyance of Messages; "OPERATOR BASIC TELEPHONY CALL" a Call, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System, destined for a telephone number of an Operator Network Termination Point, being a Call available for the conveyance of Messages; "OPERATOR BASIC TRANSIT CALL" a Call comprising the minimum service features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System destined for a Third Party Operator's system, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "OPERATOR BT TO BT TRANSIT CALL" either an Operator Basic BT to BT Transit Call or an Operator ISDN BT to BT Transit Call; "OPERATOR EXCHANGE" an Operator Local Exchange, Operator Mobile Exchange or Operator Tandem Exchange and such other Switch which the Parties may from time to time agree is an Operator Exchange; "OPERATOR INTERNATIONAL INCOMING CALL" either an Operator Basic International Incoming Call or an Operator ISDN International Incoming Call; Page 71 of 81 133 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "OPERATOR INTERNATIONAL OUTGOING CALL" either an Operator Basic International Outgoing Call or an Operator ISDN International Outgoing Call; "OPERATOR ISDN BT TO BT TRANSIT CALL" a Call comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for the BT System, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "OPERATOR ISDN INTERNATIONAL INCOMING CALL" a Call, received by the BT System from an Authorised Overseas System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for a telephone number of an Operator Network Termination Point, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "OPERATOR ISDN INTERNATIONAL OUTGOING CALL" a Call, destined for an Authorised Overseas System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, Page 72 of 81 134 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- handed over from the BT System to the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "OPERATOR ISDN TELEPHONY CALL" a Call, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for a telephone number of an Operator Network Termination Point, being a Call available for the conveyance of Messages; "OPERATOR ISDN TRANSIT CALL" a Call comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for a Third Party Operator's system, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "OPERATOR LICENCE" the licence granted to the Operator pursuant to section 7 of the Act under which the Operator runs the Operator System; "OPERATOR LICENSED AREA" the geographical area in which the Operator is permitted pursuant to the Operator Licence to provide telecommunication services; "OPERATOR LOCAL EXCHANGE" a digital Switch, except an Operator Mobile Exchange, in the Operator System which Switch connects by that Switch alone Calls Page 73 of 81 135 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- from Network Termination Points in the Operator System; "OPERATOR MOBILE EXCHANGE" a digital Switch in the Operator's System which Switch connects by that Switch those Calls from base stations and/or base station controllers in the Operator System providing a Land Mobile Radio Service for handsets; "OPERATOR'S OPERATOR" a person who answers Calls for directory or operator assistance or other similar Calls for the Operator; "OPERATOR PRS CALL" a Call to a PRS: (a) for which if originated on the Operator System, the person responsible for payment would pay at a rate higher than that which would apply to a directly dialled Operator Telephony Call of equivalent distance and duration; and (b) if payment is made by the Operator to a Operator PRS Service Provider and if payment takes into account the number or duration of Calls to that the Operator PRS Service Provider; "OPERATOR PRS SERVICE PROVIDER" a person having a contract with the Operator for the delivery of Operator PRS Calls; "OPERATOR PRS SUB SERVICE PROVIDER" a person having an arrangement for the delivery of Operator PRS Calls, whether or not legally binding, with an Operator PRS Service Provider, directly or indirectly; "OPERATOR SYSTEM" the Telecommunication System run by the Operator pursuant to the Operator Licence as in force at the date of this Agreement; "OPERATOR SWITCH CONNECTION" an Operator Exchange at which Calls handed over: Page 74 of 81 136 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) from the BT System are initially switched; or (b) to the BT System are finally switched; by the Operator; "OPERATOR TANDEM EXCHANGE" a digital tandem Switch in the Operator System which provides access to Operator Local Exchanges or Operator Mobile Exchanges; "OPERATOR TELEPHONY CALL" either an Operator Basic Telephony Call or an Operator ISDN Telephony Call; "OPERATOR TRANSIT CALL" either an Operator Basic Transit Call or an Operator ISDN Transit Call; "OUTGOING CALL" a Call handed over at a Point of Connection by the Operator to BT; "PARENT BT EXCHANGE" a BT Tandem Exchange which has a direct connection to a BT DLE, BT DLTE or BT ALE for the conveyance of Calls in the ordinary course of business; "PARTY" a party to this Agreement; "PATH PROTECTION" resilience improvement of an ISI Interconnect Link as described in Schedule 01 of Annex C; "PDH" plesiochronous digital hierarchy; "POINT OF CONNECTION" a physical point where the BT System and the Operator System are connected for Calls to be handed over from one System to the other; "PRE-INTERIM CHARGE" If the Director General has not determined the Interim Charge (or the means of calculating that charge) for the Financial Year In Question; in the case of charges payable to BT, for each Standard Service (other than a Page 75 of 81 137 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Competitive Standard Service), the charge fixed by BT for each such Standard Service; and in the case of charges payable to the Operator, for each service provided by the Operator to BT, the charge fixed by the Operator for each such service; "PRS" OR "PREMIUM RATE SERVICE" an entertainment or information service: (a) which is accessed by means of a Call and consists of, or includes the sending of, speech, music, other sounds or signals to the Calling Party; and (b) for which payment is made by means of Call charges; "PRS FRAUD" either: a loss suffered by the Operator because of the non payment of charges for BT PRS Calls, in circumstances when the BT PRS Service Provider or the BT PRS Sub Service Provider organises or arranges for BT PRS Calls to be made to his PRS in circumstances when there is a reasonable expectation that the Calling Party or the person responsible for payment does not intend to pay or will seek to avoid payment for all or part of the Call charges; or a loss suffered by BT because of the non payment of charges for Operator PRS Calls, in circumstances when the Operator PRS Service Provider or the Operator PRS Sub Service Provider organises or arranges for Operator PRS Calls to be made to his PRS in circumstances when there is a reasonable expectation that the Calling Party or the person responsible for payment does not intend to pay or will seek to avoid payment for all or part of the Call charges; Page 76 of 81 138 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "PURCHASER" the Party to whom Capacity is provided by the Supplier; "QUALITY SCHEDULE" has the meaning in Condition 17C of the BT Licence; "QUARTER DAYS" 1 January, 1 April, 1 July and 1 October in each and every year; "RCU" a remote concentrator unit supported by a BT DLTE or a BT DLE; "READY FOR SERVICE DATE" the date on which testing of Capacity at a Switch Connection is satisfactorily completed and such Capacity is ready for service (in accordance with this Agreement); "READY FOR TEST DATE" the date on which Capacity at a Switch Connection is Ready for Testing; "READY FOR TESTING" when the Supplier has satisfactorily completed the provisioning of that part of an Interconnect Link that is under his direct control; "RECEIVING PARTY" a Party receiving information from the Disclosing Party; "RELEASE SIGNAL" a signal which indicates that the transmission path of a Call has been disconnected; "RELEVANT CONNECTABLE SYSTEM" has the meaning in Condition 13.9 of the BT Licence; "REMOTE SWITCH CONNECTION" a BT Switch Connection or an Operator Switch Connection which: (a) is accessed via a BT or Operator building notified from time to time pursuant to paragraph 3 of Annex A as being suitable for supporting IECs; and (b) is connected by an BT IEC or an Operator IEC, as the context requires; Page 77 of 81 139 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "REVIEW DATE" a date referred to by that name in this Agreement or in a Schedule which entitles either Party to serve a review notice seeking to amend the charges referred to in the Carrier Price List or in that Schedule; "ROUTE AUGMENTATION" additional Capacity on an established Traffic Route; "ROUTE TYPE" the segregation of Capacity within a Traffic Route for the conveyance of certain Traffic Types; "SCHEDULE" a schedule in Annex C of this Agreement; "SDH" synchronous digital hierarchy; "SIGNALLING LINK" a 64 Kbit/s digital path within a 2 Mbit/sec Interconnect Link between two ITU-T 7 signalling nodes which is used for signalling; "SIGNALLING LINK SET" a pair of Signalling Links each within a separate 2 Mbit/s system on an Interconnect Link; "SPECIFICATION" one of the Generic Electrical and Physical Interface Specification, the Generic C7 Signalling Interface Specification, the Generic Transmission Interface Specification and the Generic SDH Interface Specification; "STANDARD SERVICE" a service, including, without limitation, a Competitive Standard Service, which a Network Provider has required from BT and which BT is obliged to provide, or to enter into an agreement to provide, under Condition 13 of the BT Licence; "SUBSIDIARY" has the meaning in sections 736 and 736A of the Companies Act 1985; "SUPPLIER" the Party providing Capacity to the other Party; Page 78 of 81 140 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "SWITCH" telecommunication apparatus within a System which performs the function of switching and routing Calls; "SWITCH CONNECTION" a BT Switch Connection or, as the context requires, an Operator Switch Connection; "SYSTEM" the BT System or, as the context requires, the Operator System; "SYSTEM ALTERATION" a change (other than a Data Management Amendment) to a Party's System, which requires a change to be made to the other Party's System to allow the continuance of the conveyance of Calls across a Point of Connection pursuant to this Agreement; "TARGET PERFORMANCE" has the meaning in Condition 17C of the BT Licence; "TECHNICAL MASTER PLAN" a document recording details of the Points of Connection and the plans for development of further Points of Connection; "TECHNICAL REVIEW MEETING" a technical meeting pursuant to paragraph 13 of Annex A; "TELECOMMUNICATION SYSTEM" a telecommunication system within the United Kingdom as defined in section 4 of the Act or an Authorised Overseas System; "THIRD PARTY" a person other than BT or the Operator; "THIRD PARTY INTERCONNECT" interconnect using a Third Party ISI Interconnect Link; "THIRD PARTY INTERCONNECT AGREEMENT" either: (a) an agreement between BT and a Third Party Operator pursuant to Condition 13 as it applies from time to time of the BT Licence or the equivalent Condition of the Third Party Operator licence; or Page 79 of 81 141 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (b) an agreement between the Operator and a Third Party Operator pursuant to the Condition equivalent to Condition 13 of the BT Licence contained in either the Operator or Third Party Operator licences; "THIRD PARTY ISI INTERCONNECT LINK" an Interconnect Link as defined in Schedule 01; "THIRD PARTY OPERATOR" a person being neither the Operator nor BT who is licensed under the Act to run a Relevant Connectable System; "TIBS" BT's Telecommunications Input Billing System, which records information on certain Calls which use the services of a BT Operator or the operator of a Third Party; "TIBS BILLING INFORMATION AND REFUND REPORT" reports in the same or substantially the same form as in the Billing Manual; "TIBS INFORMATION" itemised Call records of the services provided by BT Operators or the operator of a Third Party to the Operator which would have resulted in a charge from BT had the Calling Parties been BT Customers, together with reports relating to Transfer Charge Calls, ineffective calls, and any other records which will result in charges to be paid by or to the Operator for such services; "TRAFFIC FORECAST" a forecast of traffic at a BT Switch Connection or Operator Switch Connection, such forecast provided by one Party to the other pursuant to paragraph 8 of Annex A; "TRAFFIC ROUTE" discrete and identifiable units of 2 Mbit/s Capacity within an Interconnect Link; "TRAFFIC STREAM" a group of Calls carried from a specific place in one Party's System to a specific place in the other Party's System; Page 80 of 81 142 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "TRAFFIC TYPE" a different identifiable type of Call; "TRANSFER CHARGE CALL" a Call for which the Called Party is requested and agrees to pay the cost of a Call from the Calling Party; "VAT" United Kingdom Value Added Tax; "WEEKEND" period of time between 2400 on Friday and 2400 on Sunday or such other period of time as shall be agreed between the Parties; "WORKING DAY" any day other than Saturdays, Sundays, public or bank holidays in the United Kingdom. Page 81 of 81 143 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C INDEX SCHEDULE NUMBER TITLE JOINT SERVICES 01 In-span Interconnect (ISI), Third Party ISI & Interconnect Extension Circuits 04 Number Portability 05 Reciprocal Ring Back When Free Service BT SERVICES 101 BT Telephony Calls to the BT System 102 BT Transit Calls via the BT System 103 BT Operator to Operator Transit Calls via the BT System 104 BT International Outgoing Calls to Authorised Overseas Systems via the BT System 110 Freefone(TM) 0800 Calls 111 Lo-Call(TM) 0345 Calls 112 BT Premium Rate Service Calls 116 National Call(TM) 0990 Calls 117 Phone Base(TM) Calls 118 BT Timeline(TM) Service 120 National Operator Assistance Service 121 Directory Enquiry Service 122 International Operator Assistance Service 123 International Directory Enquiry Service 124 Emergency Service 125 Emergency Service (including Post Code allocation for Fixed Emergency Calls) 126 Radiotelephone Calls 130 Customer Sited Interconnect 140 Data Management Amendments 150 Entries in BT's Number Information System (NIS) and Phone Books 152 Supply of BT Phone Books
PAGE 1 of 138 144 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 153 Supply of Customised Telephone Directories 154 Licence to Use the BT's NIS Database 155 Accesss to the BT DAS Database using Operator Services Customer Access and Security System (OSCASS) OPERATOR SERVICES 541 Operator Telephony Calls to the Operator System 545 Operator International Incoming Calls from Authorised Overseas Systems via the BT System handed over to the Operator System 546 Operator BT to BT Transit Calls (Ported) via the Operator System
PAGE 2 of 138 145 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 01 IN SPAN INTERCONNECT (ISI), THIRD PARTY ISI & INTERCONNECT EXTENSION CIRCUITS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "2MBIT/S ISI INTERCONNECT LINK" an Interconnect Link comprising a 2Mbit/s path (within an ISI Interconnect Link), two Intrabuilding Links, Multiplexor service and as appropriate, a Signalling Link and/or one or two Interconnect Extension Circuits; "ADDITIONAL LINK" a Link, being part of an Interconnect Link, between a Third Party Operator building, and an Operator building, or (as the context requires), a BT building; "EXISTING LINK" an ISI Interconnect Link between BT and a Third Party Operator; "PATH PROTECTION" the facility of two transmission paths providing a particular ISI Interconnect Link whereby the failure of one transmission path causes the transmission of the ISI Interconnect Link to switch to the alternative; "THIRD PARTY ISI INTERCONNECT LINK" an ISI Interconnect Link comprising an Additional Link and an Existing Link.
2. DESCRIPTION OF SERVICE 2.1 This Schedule applies to the joint provision by the Parties of In span Interconnect and/or Third Party ISI Interconnect Links, the provision by either Party of an IEC and the provision by BT of Path Protection. 2.2 In span Interconnect (ISI) is the provision jointly by each Party of an Interconnect Link by the provision of an ISI Interconnect Link and 2Mbit/s ISI Interconnect Links, such Link having its Point of Connection on the PAGE 3 of 138 146 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- public highway or, subject to the Parties' agreement, on a prospectively maintainable public highway, with portion of the Interconnect Link being provided by each Party on its side of the Point Of Connection. 2.3 For the purposes of this Schedule, "unidirectional Calls" shall be those Calls for which a Party has responsibility pursuant to paragraph 5.1.3 of Annex A. 3. GENERAL 3.1 Upon a Party's (the requesting Party) request, the other Party shall, in accordance with the provisions of this Schedule and Annex A, provide the relevant portion of the ISI Interconnect Links using either SDH or PDH technology (subject to that other Party supporting the technology). 3.2 The Point of Connection of an ISI Interconnect Link is the point where a Party's duct is joined to the wall of the other Party's jointing chamber. 3.3 The Point of Connection of an ISI Interconnect Link or a Third Party ISI Interconnect Link shall not be located at such distance from the other Party's Switch Connection that signal regeneration is required to be carried out by such other Party. 3.4 Forecasting, technical interfaces and their application, provisioning leadtimes and test procedures are specified in Annex A. 4. PROVISION OF IN-SPAN INTERCONNECT ("ISI") 4.1 A Party (the requesting Party) may request an Interconnect Link to convey Calls (a) from the requesting Party's System; or (b) both to and from its System. 4.2 The Parties shall agree the number of pairs of fibres to be equipped within the ISI Interconnect Links to take account of the forecast requirement for 2Mbit/s ISI Interconnect Link. The Parties shall co-operate to ensure that the capacity of the ISI Interconnect Link is augmented from time to time to meet both Parties' forecast transmission capacity requirements. 4.3 Procedures for the installation of the Interconnect Link and of the 2Mbit/s ISI Interconnect Links are described in the Provisioning Manual and ongoing maintenance arrangements are described in the Operations and Maintenance Manual. 4.4 2Mbit/s ISI Interconnect Links shall be ordered in accordance with Annex A. The timescales for the provision of 2Mbit/s ISI Interconnect Links are detailed in paragraph 11 of Annex A. PAGE 4 of 138 147 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.5 The requesting Party shall nominate the other Party's Switch Connection in accordance with the provisions of Annex A. 4.6 The ISI Interconnect Link shall be established by the requesting Party installing its cable to the other Party's jointing chamber (at, subject to paragraphs 4.7 and 4.10, a precise physical location agreed between the Parties) where it shall be: 4.6.1 jointed to the other Party's cable in the jointing chamber; or 4.6.2 handed over to the other Party to be drawn by the other Party into: (a) that other Party's building, (which shall be the building housing the Switch Connection, (except if an IEC is provided under paragraph 7, when the other Party's building is ascertained pursuant to paragraph 7.4)); or (b) another jointing chamber, if the requesting Party's cable meets the standard specified in the Operational Provisioning Manual 4.7 If, pursuant to paragraphs 4.10.2 and/or 4.11, the Parties locate the jointing chamber at a distance which is greater than 100 Metres from the other Party's curtilage of the building housing the LTE of the ISI Interconnect Link, the requesting Party shall pay for: 4.7.1 duct charges (if any); and ISI Interconnect Link rental charges on the distance which is more than 100 metres from the other Party's curtilage aforesaid subject to the provisions of paragraph 11.4, in accordance with the relevant charges specified from time to time in the Carrier Price List. 4.8 Subject to paragraphs 4.7 and 4.10: the jointing chamber for an ISI Interconnect Link shall be provided, owned and maintained by the other (i.e. the non requesting Party) Party at its own expense; and 4.8.2 each Party will provide, own, maintain and be responsible for all ducting, plant and equipment and will bear its own costs for the ducting, cabling and maintenance of the ISI Interconnect Link on its side of the Point of Connection; and PAGE 5 of 138 148 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.8.3 if continuous cable is used, the requesting Party hereby agrees that ownership of that part of the cable on the other Party's side of the Point of Connection passes to the other Party. ISI INTERCONNECT LINKS FOR BOTH PARTIES 4.9 If the requested ISI Interconnect Link is to contain 2Mbit/s ISI Interconnect Links conveying unidirectional traffic in different directions the Parties shall, not more than 20 Working Days from the date of written request, endeavour to agree the location of the jointing chamber required for the Point of Connection. 4.10 If pursuant to paragraph 4.9 the Parties fail to reach agreement: 4.10.1 a Party may request an ISI Interconnect Link to convey unidirectional Calls from the requesting Party's System; or 4.10.2 the requesting Party may nominate the location of the jointing chamber required for the Point of Connection and if such nomination is agreed, the requesting Party shall pay the charges specified from time to time in the Carrier Price List being the charges in respect of (a) an ISI Interconnect Link, (b) duct, (c) bothway Signalling Link Set and (d) each 2Mbit/s ISI Interconnect Link and if not later than 20 Working Days from the date of such written request no agreement is reached on the location of the jointing chamber, either Party may notify a Dispute. ISI INTERCONNECT LINKS FOR ONE PARTY 4.11 Unless otherwise agreed, if the requested ISI Interconnect Link is to convey unidirectional Calls from the requesting Party's System: 4.11.1 the location of the jointing chamber required for the Point of Connection for such ISI Interconnect Link shall be on the public highway immediately outside the curtilage of the building referred to in paragraph 4.6.2; 4.11.2 the requesting Party shall pay the Charges specified from time to time in the Carrier Price List being the charges in respect of (a) an ISI Interconnect Link, (b) duct, (c) unidirectional Signalling Link Set and (d) each 2 Mbit/s ISI Interconnect Link. 5. PATH PROTECTION REQUESTED BY THE OPERATOR 5.1 For an ISI Interconnect Link the Operator may request, and BT shall provide, Path Protection using: PAGE 6 of 138 149 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) a single BT jointing chamber with a single cable and two separate pairs of fibre in that cable; or (b) a single BT jointing chamber with two separate cables; or (c) two separate BT jointing chambers with two separate cables into those BT jointing chambers; and a suitable transmission switching mechanism, as described in Annex A, without a change to the cable or cables connected to the Switch Connection. 5.2 If the Operator requests Path Protection using two jointing chambers BT shall endeavour to use a suitable existing jointing chamber (the "protection jointing chamber"). 5.3 If a suitable protection jointing chamber cannot be identified or used, at the Operator's request BT shall provide a written quotation for the installation by BT of the protection jointing chamber. 5.4 If the quotation referred to in paragraph 5.3 is accepted, BT shall install the protection jointing chamber for the second cable. 5.5 For the avoidance of doubt, the protection jointing chamber shall be installed, owned and maintained by BT. 6. PROVISION OF THIRD PARTY ISI 6.1 Subject to an Interconnect Link having been provided pursuant to this Agreement, a Party (the requesting Party) may, pursuant to the terms of this Schedule, request, and the other Party shall, subject to the provisions of this Schedule, agree to the installation of a Third Party ISI Interconnect Link. 6.2 2Mbit/s ISI Interconnect Links provided pursuant to this paragraph 6 shall be ordered in accordance with Annex A. The timescales for the provision of 2 Mbit/s Interconnect Links are detailed in Annex A. 6.3 The requesting Party shall obtain agreement of the Third Party Operator to use an Existing Link as part of the Third Party ISI Interconnect Link. 6.4 The requesting Party shall provide and/or procure the provision and maintenance of the Additional Link, whether by the Third Party Operator or, if the requesting Party is the Operator, and subject to contract, by BT. 6.5 The other Party shall assume no obligation under this Agreement for the Existing Link. In particular, but without limitation, the other Party shall PAGE 7 of 138 150 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- have no liability to the requesting Party if the Existing Link be taken out of operation in accordance with the Third Party Interconnect Agreement. 6.6 The requesting Party shall: 6.6.1 comply with the provisions of paragraphs 3 and 4 above, as if the Additional Link was provided by the requesting Party under paragraph 4; and 6.6.2 ensure that sufficient arrangements are in place between the requesting Party and the Third Party Operator to enable the requesting Party so to comply; and 6.6.3 have no obligation to the other Party for the Existing Link save as expressly provided in this Agreement. 6.7 The Third Party ISI Interconnect Link shall, for the purposes of the respective rights and obligations of the Parties under this Agreement be deemed to be an ISI Interconnect Link and that portion on the Operator's side of the Point of Connection shall be deemed a part of the requesting Party's System. This provision shall not be construed to extend the area covered by the requesting Party's System beyond the boundaries set out in that Party's Licence. 7. PROVISION OF INTERCONNECT EXTENSION CIRCUITS ("IECS") 7.1 In accordance with this paragraph 7, a Party may request, and the other Party shall provide, an Interconnect Extension Circuit, from a building referred to in Appendix A of Annex A to a Remote Switch Connection. 7.2 IECs shall comply with the Specifications applicable to the provision of Links. A Party shall provide IECs with, at its absolute discretion, either PDH or SDH technology. PAGE 8 of 138 151 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7.3 The following table specifies the available connections for BT IECs from particular ISI termination points:
----------------------------------------------------------------------------------------- ISI link DLE serving Parent BT Dependent Tandem terminating the Operator Exchange DLE Exchange not point Licensed (Notes 2 being a Parent Area (Notes 1 and 3) BT Exchange and 3) ----------------------------------------------------------------------------------------- BT DLE No Yes Not No Applicable ------------------ ------------------ --------------- --------------- ------------------- BT DLTE Yes Yes Yes No ------------------ ------------------ --------------- --------------- ------------------- BT Tandem Yes Yes Yes No Exchange ------------------ ------------------ --------------- --------------- ------------------- BT Yes Yes Not Applicable No transmission node ------------------ ------------------ --------------- --------------- -------------------
Note 1: Provided that the BT DLE: (a) is located in the same or Adjacent BT Charge Group to the Point of Connection; and (b) supports BT Customers in the Operator Licensed Area; and (c) has an existing direct Traffic Route with that termination point. (Not applicable where the ISI Link termination point is a BT transmission node). Note 2: The Parent BT Exchange must have a direct connection to a DLE serving the Operator Licensed Area and that DLE must be located in the same or adjacent charge group to the Point of Connection. Note 3: For the purpose of the provision of IEC's only, the Operator Licensed Area shall include any areas notified to BT in writing, which are continuous geographical areas (or areas that would be continuous but for separation by a tract of water no more than 8 Kilometres wide), which are subject to Third Party Operator Licences and where the Third Party Operators are Associated Companies of the Operator. 7.4 Operator IECs shall be available between any building referred to in Appendix A of Annex A to a Remote Switch Connection. PAGE 9 of 138 152 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7.5 Subject to the provisions of Annex A, if the transmission capacity at a building is exhausted and additional capacity for an IEC is requested by a requesting Party, the other Party shall use its reasonable endeavours to provide the additional capacity as soon as reasonably practicable and shall notify the requesting Party of the anticipated date of such provision. 7.6 If a Party notifies the other Party pursuant to paragraph 3 of Annex A that a building is no longer available for establishing IECs to Remote Switch Connections, the other Party may continue to order IECs from that building for the then current ACO Period under the then current Advance Capacity Order or such longer further period as the Parties may agree in writing. Thereafter the first Party shall not be obliged to provide an additional IEC from that building. 8. SIGNALLING 8.1 When ordering, for the first time, 2Mbit/s ISI Interconnect Links between a specific BT Switch Connection and a specific Operator Switch Connection the Requesting Party shall order a Signalling Link Set and specify the Route Type(s). 8.2 The Requesting Party shall order an additional Signalling Link Set if the total number of 2Mbit/s ISI Interconnect Links in an ISI Interconnect Link exceed 40 or multiples of 40. 8.3 An order for a Signalling Link Set shall include an order for two Intrabuilding Links. 9. ROUTE TYPES 9.1 Each Traffic Route is provided with a Route Type. Where a Party orders an additional Route Type it shall specify the required Traffic Type. 10. REARRANGEMENTS 10.1 The requesting Party may request in accordance with Annex A the rearrangement of Intrabuilding Links on its side of the Point of Connection or in the building housing the other Party's Switch Connection. 11. CHARGING 11.1 Subject to the provisions of this paragraph 11 for each provision by one Party to the other of ISI Interconnect Links, 2Mbit/s ISI Interconnect Links and associated works (including the Multiplexor service and IECs), the requesting Party shall pay to the other Party the appropriate charges specified from time to time in the Carrier Price List. PAGE 10 of 138 153 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 11.2 The connection and rental charges shall be due on the earlier of the relevant Ready for Service Date and 30 days after the relevant Ready for Testing date. Subsequent rental charges shall be payable in accordance with the periodicity specified from time to time in the Carrier Price List. 11.3 In addition to the charges specified from time to time in the Carrier Price List, each Party shall, if applicable, make the additional payments specified in Appendix C of Annex A. 11.4 Rental for an ISI Interconnect Link shall be payable according to the following table:
---------------------------------------------------------------------------- CLASSIFICATION OF ISI RENTAL PAYABLE INTERCONNECT LINK ---------------------------------------------------------------------------- Unidirectional Call As set down in the Carrier Price List Conveyance (Note 1) (Note 2). (paragraph 4.11.2) ---------------------------------------------------------------------------- Bothway Call Conveyance None payable. (Agreed Location (Note 1) (paragraph 4.7) ---------------------------------------------------------------------------- Bothway Call Conveyance R = P x A (Location not agreed but nominated) (Note 1) (paragraph 4.10.2) Where: "R" is the rental payable, "P" is the rental price set down in the Carrier Price List (Note 2), and "A" = B - C Where: "B" is the number of 2Mbit/s ISI Interconnect Links conveying the Calls of the Party who requested the ISI Interconnect Link (Note 1); and "C" is the total number of 2Mbit/s ISI Interconnect Links provided on that ISI Interconnect Link. ----------------------------------------------------------------------------
Note 1: For the purpose of this table, Route Types involving the conveyance of Calls to one Party, when those Calls are deemed to be that Party's Calls (by way of example Indirect Access Calls), shall not be taken into consideration when determining ISI Interconnect Link classification. Note 2: In this Schedule references to the charges specified in the Carrier Price List are those specified from time to time. 11.5 An Intrabuilding Link charge applies to each order for a 2Mbit/s ISI Interconnect Link. If an Intrabuilding Link contains a Signalling Link which PAGE 11 of 138 154 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- supports unidirectional traffic the charge for that Intrabuilding Link is included in the Signalling Link Set charge. 11.6 There are two different Signalling Link Set charges in respect of an ISI Interconnect Link, namely, a charge for such a Link conveying unidirectional traffic (including Indirect Access Calls, notwithstanding such Calls being conveyed in the opposite direction,) and a charge for such a Link carrying bothway traffic. 11.7 The Signalling Link Set charge includes one single Route Type. Charges for additional Route Types are payable as specified from time to time in the Carrier Price List. 11.8 A Multiplexor service charge applies to each order for a 2Mbit/s ISI Interconnect Link. 11.9 The IEC charge applies to each order for a 2Mbit/s ISI Interconnect Link, which order includes an IEC. The requesting Party shall pay the charges for the provision of an IEC. PATH PROTECTION PROVIDED BY BT 11.10 Subject to the following paragraphs, the Path Protection charges shall be the sum of the relevant charges specified from time to time in the Carrier Price List. 11.11 Charges for Path Protection shall be the sum of the following relevant component charges:
-------------------------------------------------------------------------------------- PATH PROTECTION -------------------------------------------------------------------------------------- Type of Component Single Cable Two Cables Single Two Cables Technology Chargeable Single Jointing Jointing Chamber Two Jointing Chamber Chambers ----------------- ---------------- ------------------ ------------------- --------------- PDH A YES YES YES ----------------- ---------------- ------------------ ------------------- --------------- B n/a n/a YES(1) ----------------- ---------------- ------------------ ------------------- --------------- C n/a n/a YES ----------------- ---------------- ------------------ ------------------- --------------- D n/a YES YES ----------------- ---------------- ------------------ ------------------- --------------- E n/a YES(2) YES(2) ----------------- ---------------- ------------------ ------------------- --------------- SDH A n/a n/a n/a ----------------- ---------------- ------------------ ------------------- --------------- B n/a n/a YES ----------------- ---------------- ------------------ ------------------- --------------- C n/a n/a YES ----------------- ---------------- ------------------ ------------------- --------------- D n/a YES YES ----------------- ---------------- ------------------ ------------------- --------------- E n/a YES(2) YES(2) ----------------- ---------------- ------------------ ------------------- ---------------
PAGE 12 of 138 155 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Note 1 Only charged if required under paragraph 5.3 Note 2 Two splices may be required. Where:
----------------- ------------------------------------------ Component Charge ----------------- ------------------------------------------ A = transmission switching equipment B = second (protection) jointing chamber C = duct D = cable E = cable splice ----------------- ------------------------------------------
11.12 Each cable splice required for the provision of Path Protection has a separate charge. 11.13 Connection and rental charges shall be payable for each ISI Interconnect Link used for Path Protection. Rental shall be payable for a minimum of 12 months. Subject to payment being made for the then current minimum period of 12 months, rental charges shall be payable until the Operator requests BT in writing to cease that Path Protection. 11.14 If the Operator requests Path Protection on a particular ISI Interconnect Link and: (a) the ISI Interconnect Link is the sole Interconnect Link between the specific BT Switch Connection and the specific Operator Switch Connection; and (b) there is no other Interconnect Link between that specific Operator Switch Connection and any other BT Switch Connection; no charge for Path Protection on that particular ISI Interconnect Link shall be payable by the Operator while BT uses that ISI Interconnect Link as the sole Interconnect Link to convey Calls to that specific Operator Switch Connection. 11.15 If one or more of the conditions of paragraph 11.14 cease to apply, the rental charges specified from time to time in the Carrier Price List for the particular ISI Interconnect Link will be payable pursuant to paragraph 11.13. 12. REVIEW PAGE 13 of 138 156 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 12.1 The Review Date for Operator prices under this Schedule shall be 1 April each year. PAGE 14 of 138 157 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 01.1 IN-SPAN INTERCONNECT AND INTERCONNECT EXTENSION CIRCUITS [GRAPHIC OMITTED] PAGE 15 of 138 158 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 01.2 THIRD PARTY INTERCONNECT [GRAPHIC OMITTED] PAGE 16 of 138 159 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 04 NUMBER PORTABILITY 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "CENTREX" a partition of an Exchange used to provide business features and short code dialling as required by Customers; "DDI" direct dialling in; "DONOR" the Party from whose System the Number is being ported; "DONOR SYSTEM" the System from which the Number is being ported; "NP AREA" such area as has been agreed in writing by the Parties in which Number Portability will be carried out; "NUMBER" shall have the meaning ascribed thereto in Condition 34B of the BT Licence and for the purposes of this Agreement there shall be excluded Numbers allocated to ISDN exchange lines, and to Number Groups used for Centrex, DDI private branch exchange or other private branch exchange purposes; "NUMBER GROUP" a range of consecutive Numbers used as a group by a Party for certain functional or Customer purposes; "NUMBER PORTABILITY" an arrangement between the Parties whereby a Customer ceases to be provided with a Network Termination Point by the Donor System and such Customer (at the same address and at the same set of premises) is provided with a Network PAGE 17 of 138 160 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Termination Point by the Recipient System, such Network Termination Point having the same Number as had the Network Termination Point ceased on the Donor System; "PORTED NUMBER NTP" a Network Termination Point on the Recipient System being a Network Termination Point to which a Number has been ported; "RECIPIENT" the Party to whose System the Number is being ported; "RECIPIENT SYSTEM" the System to which the Number is being ported. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, the Parties shall provide Number Portability in the NP Area in accordance with the Number Portability End to End Process Manual ("Manual") as agreed in writing from time to time by the Parties. 2.2 Pursuant to this Schedule and subject to the Parties having successfully completed planning studies in accordance with the Manual the Parties shall provide Number Portability in the NP Area. 2.3 For the avoidance of doubt, the Parties acknowledge that the provision of Number Portability to Customers pursuant to this Schedule applies only to those Customers who remain at the same address and at the same set of premises. 2.4 Neither Party shall be obliged to offer Number Portability to the other Party's Customers who have an exchange line connected to the other Party's Exchange which Exchange has not been approved under the Manual by such other Party for Number Portability. 2.5 If a Customer having a Ported Number NTP changes address or ceases service with the Recipient System it is agreed that the Ported Number of the Ported Number NTP shall revert to the Donor for use in the Donor's System. PAGE 18 of 138 161 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.6 The Parties agree that the Calls handed over from each other to Ported Number NTPs shall be conveyed in accordance with one or more of the Schedules listed in Appendix 04.1. 2.7 Each Party shall correct faults which occur in its System which affect the conveyance of Calls to Ported Number NTPs in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.8 Notwithstanding the provisions of paragraph 1.4 of the main body of this Agreement the Parties agree that for the purposes of the provision of Number Portability Sections 2, 3 and 5.1 to 5.5 (inclusive) of the Manual Issue 2.0 dated 16/04/96 shall be legally binding. The other provisions of the Manual shall not be legally binding. 2.9 For the purposes of the provision of Number Portability, Schedule 140 (Data Management Amendments) shall be deemed to be amended by the addition of a further entry to paragraph 2.6.1 thereof, namely: "route Calls to Ported Number NTPs as defined in Schedule 04 (Number Portability)." 3. ROUTING 3.1 The conveyance of Calls to Ported Number NTPs shall be in accordance with the routing principles specified in Annex A and the Manual. 4. CHARGING 4.1 The Parties agree, for the conveyance of Calls handed over from each other to Ported Number NTPs, to pay a charge in accordance with one or more of the Schedules listed in Appendix 04.1. 4.2 For the avoidance of doubt, all charges pursuant to the Schedules listed in Appendix 04.1 of this Schedule shall be ascertained and paid for by the Parties in accordance with such Schedules in addition to such other charges as may be payable pursuant to this Schedule. 4.3 The Parties shall pay the charges at the rates for Number Portability specified from time to time in the Carrier Price List. 5. REVIEW 5.1 The Review Date for charges under paragraph 4.3 of this Schedule shall be 1 April each year. PAGE 19 of 138 162 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 04.1 The telephony conveyance Schedules referred to in paragraphs 2.6, 4.1 and 4.2 of this Schedule are: Schedule Number: Title: - ---------------- ------ PAGE 20 of 138 163 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- BT STANDARD INTERCONNECT AGREEMENT SCHEDULE 05 RECIPROCAL RING BACK WHEN FREE SERVICE 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "RING BACK WHEN FREE SERVICE" a service offered by one Party to its Customers, whereby a Calling Party calling from the number of a Customer of such service and who in attempting to set up a Call to a Called Party on the other Party's System receives line busy engaged tone, is then able to initiate the later automatic set-up by the network of a subsequent Call to that Called Party once the Called Party's exchange line becomes free; "RING BACK WHEN FREE SPECIFICATION" Specification PNO-ISC/INFO/004 Section 5 Issue 1 Draft E dated February 1996 as updated from time to time. "VIRTUAL CALL" a Message using the C7IUP Enveloped Digital Private Network Signalling System protocol (using the Nodal End to End Data Messages) specified in the Ring Back When Free Specification. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, each Party shall carry out its obligations under this Schedule in order that the other Party may provide a Ring Back When Free Service to its Customers. 2.2 Each Party shall convey a Virtual Call in connection with a Ring Back When Free Service in accordance with Annex A and the Ring Back When Free Specification. 2.3 Any necessary technical requirement for the Ring Back When Free Service shall be agreed by the Parties before either Party shall be obliged to convey any Virtual Call under paragraph 2.2. PAGE 21 of 138 164 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.4 For the avoidance of doubt, the Parties agree that 2.4.1 any Call attempt under which a Calling Party receives the line busy engaged tone, and 2.4.2 any successful Call which may be established as a result of the Ring Back When Free Service shall be conveyed in accordance with Schedule 101 or the equivalent Schedule for Operator Telephony Calls to the Operator System, as appropriate. 2.5 Each Party accepts that the other Party shall not be obliged to convey a Virtual Call under paragraph 2.2 if the exchange line of the Called Party is not one in respect of which such other Party provides or would be able to provide a Ring Back When Free Service to such Called Party as its Customer. 2.6 Each Party shall undertake the obligations under this Schedule during those periods of time and at the same standard and quality of service as such Party undertakes for the Customers of its own Ring Back When Free Service. 2.7 Each Party shall correct faults which occur in its System which affect its obligations under this Schedule in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.8 Each Party shall include Virtual Calls generated by its Ring Back When Free Service in its Traffic Forecasts referred to in Annex A. 3. ROUTING 3.1 The conveyance of a Virtual Call between the Parties shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 For the conveyance of a Virtual Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. 4.2 For the conveyance of a Virtual Call by the Operator, the BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. PAGE 22 of 138 165 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5. COMMENCEMENT DATE 5.1 Each Party shall commence to undertake its obligations under this Schedule on a date to be agreed in writing by the Parties. 6. REVIEW 6.1 The Review Dates for the charges payable under this Schedule shall be 1 April each year. PAGE 23 of 138 166 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 101 BT TELEPHONY CALLS TO THE BT SYSTEM 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "ADC CALL CATEGORY" one of Local ADC, National ADC or International ADC, as appropriate; "BT DOUBLE PLUS TANDEM a BT Telephony Call handed over from the SEGMENT CALL" Operator System to the BT System, initially switched by a BT Tandem Exchange, thereafter switched by one or more other BT Tandem Exchanges, and passed to a BT ALE or BT DLE for delivery to a BT Network Termination Point; "BT LOCAL EXCHANGE SEGMENT CALL" a BT Telephony Call handed over from the Operator System to the BT System at a BT DLE, for delivery to a BT Network Termination Point other than via a BT Tandem Exchange; "BT SINGLE TANDEM SEGMENT CALL" a BT Telephony Call handed over from the Operator System to the BT System, initially switched by a BT Tandem Exchange, and passed to a BT ALE or BT DLE for delivery to a BT Network Termination Point; "INTERNATIONAL ADC" contributions towards BT's Access Deficit that apply to Calls handed over from the Operator System ("actual Calls") where, if Calls (other than Indirect Access Calls) were conveyed in the opposite direction (whether or not by the Operator System), between the same originating and terminating points as those actual Calls ("reverse Calls"), such reverse Calls would PAGE 24 of 138 167 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- be classified as international calls in the BT Retail Price List; "LOCAL ADC" contributions towards BT's Access Deficit that apply to Calls handed over from the Operator System ("actual Calls") where, if Calls (other than Indirect Access Calls) were conveyed in the opposite direction wholly within the BT System between the same originating and terminating points (Calls made or received on mobile terminal apparatus for this purpose being treated as originating or terminating at the relevant wireless telegraphy station carrying the Call) as those actual Calls ("reverse Calls"), such reverse Calls would be classified as local calls in the BT Retail Price List; "NATIONAL ADC" contributions towards BT's Access Deficit that apply to Calls handed over from the Operator System ("actual Calls") where, if Calls (other than Indirect Access Calls) were conveyed in the opposite direction wholly within the BT System between the same originating and terminating points (Calls made or received on mobile terminal apparatus for this purpose being treated as originating or terminating at the relevant wireless telegraphy station carrying the Call) as those actual Calls ("reverse Calls"), such reverse Calls would be classified as national calls in the BT Retail Price List. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey BT Telephony Calls handed over from the Operator System to the appropriate BT Network Termination Point. 2.2 BT International Incoming Calls, BT Transit Calls, BT Operator to Operator Transit Calls and Calls to Ancillary Services are not conveyed pursuant to this Schedule. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. PAGE 25 of 138 168 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.4 BT's obligation to convey BT ISDN Telephony Calls is subject to the respective Systems and all relevant Switch Connections of both Parties being suitable for the conveyance of BT ISDN Telephony Calls. 2.5 BT shall not be obliged under this Schedule to make its System suitable for the conveyance of BT ISDN Telephony Calls or to provide equipment to its Customers enabling BT ISDN Telephony Calls. 2.6 BT shall convey BT Telephony Calls during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.7 Each Party shall correct faults which occur in its System which affect the conveyance of BT Telephony Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 3. ROUTING 3.1 The conveyance of BT Telephony Calls shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 For the conveyance of each BT Telephony Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. 4.2 For the conveyance of each BT Telephony Call by BT, which is also a Transfer Charge Call, BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List, and the Operator shall pay no charge to BT pursuant to paragraph 4.1. 5. CONTRIBUTIONS TO BT'S ACCESS DEFICIT 5.1 Subject to the provisions of this paragraph 5, the Operator shall pay for each Call, a contribution to BT's Access Deficit at the rate specified for the ADC Call Category specified from time to time in the Carrier Price List. For these purposes, the ADC Call Category shall be ascertained at the time when the Answer Signal is generated. 5.2 If, prior to the date of the Agreement, either Party has requested the Director General pursuant to Condition 13.5A of the BT Licence to reduce the contribution to be made by the Operator towards BT's Access Deficit, then payment of the contribution referred to in such request shall be suspended until the Director General has dealt with the request. PAGE 26 of 138 169 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.3 If, following a request referred to in paragraph 5.2, the Director General determines not to reduce the contribution or determines that a partial contribution shall be payable by the Operator towards BT's Access Deficit, such contribution shall be payable accordingly with effect from the date of this Agreement. The Operator shall pay any outstanding contribution not later than one month after the date of such determination. 5.4 If, following a request referred to in paragraph 5.2, the Director General determines that no contribution shall be payable by the Operator towards BT's Access Deficit no such contribution shall be payable under paragraph 5.1. 5.5 If the Director General at any time determines pursuant to Condition 13.5A of the BT Licence that the contribution payable by the Operator towards BT's Access Deficit should be varied or a contribution becomes payable in accordance with Condition 13.5A of the BT Licence then the Agreement shall be varied accordingly. 5.6 The Operator shall have no liability to pay a contribution to BT's Access Deficit in respect of Calls which have originated on the system of another licensed operator and are conveyed over the Operator System to the BT System, provided that; 5.6.1 subject as provided in paragraph 5.6.4 below the Operator shall not agree to convey over the Operator System to the BT System Calls originated on the system of a Third Party Operator or first conveyed in the UK by the system of a Third Party Operator unless that operator shows to the Operator's reasonable satisfaction that it has entered into an agreement with BT to pay a contribution to BT's Access Deficit for all Calls originated on the system of that Third Party Operator, or first conveyed in the UK by the system of that Third Party Operator, and conveyed to their ultimate destination by means of the BT System (whether by direct connection between the system of that Third Party Operator and the BT System or by transit through any other system); 5.6.2 if the Director General (following notification from BT) notifies the Operator that a Third Party Operator, having entered into an agreement as described in paragraph 5.6.1 above, has failed to make a contribution to BT's Access Deficit as required by that agreement and that all provisions in that agreement for the resolution of disputes have been exercised and have failed, then the Operator shall as quickly as reasonably practicable cease to convey Calls originated on the system of that Third Party Operator or first conveyed in the UK by that operator's system to the BT System. The Director General shall not notify the Operator pursuant to this paragraph if, having heard representations from the Third Party Operator concerned, he is satisfied that the payment demanded by BT from the Third Party PAGE 27 of 138 170 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Operator has not been calculated in accordance with this proviso, save that it shall be deemed to be conclusive proof that the payment has been properly calculated if BT obtains judgement in a court of competent jurisdiction for its recovery as a debt and any appeal against that judgement has been finally disposed of; 5.6.3 the Operator shall provide to BT at BT's expense such information about those Calls described in paragraph 5.6.1 as the Operator is practicably and rightfully able to provide and as BT may reasonably require to calculate the amount of contribution to the Access Deficit so payable. During such time as the Operator is unable to provide a record of the Calls described in paragraph 5.6.1, it shall provide information to BT for the purposes of this paragraph on the basis of a method of estimation determined by the Director General after consulting with such other persons as he considers appropriate; 5.6.4 the obligation of the Operator in paragraph 5.6.1 shall not apply to Calls which the Director General has determined or BT has agreed should not give rise to a contribution to BT's Access Deficit by any such Third Party Operator and this paragraph shall cease to apply if BT ceases to be entitled by virtue of Condition 13 of the BT Licence to recover from the Third Party Operator a contribution to its Access Deficit. 5.7 BT shall indemnify and keep indemnified the Operator against any liability claim, loss or damage resulting from the Operator's performance of obligation under paragraph 5.6.1 or 5.6 2 in circumstances where in case of default or negligence of BT the Operator would not have been so obliged to prevent or cease conveyance of a Call emanating from the Third Party Operator. 5.8 The Parties agree that either Party may initiate a review of paragraphs 5.6 and 5.7 pursuant to paragraph 19.1.3 of the main body of the Agreement. PAGE 28 of 138 171 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 102 BT TRANSIT CALLS VIA THE BT SYSTEM 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT DOUBLE PLUS TANDEM TRANSIT CALL" a BT Transit Call, handed over from the Operator System to the BT System, initially switched by a BT Tandem Exchange, thereafter switched by one or more other BT Tandem Exchanges, and handed over from the BT System to a Third Party Operator's system; "BT SINGLE TANDEM TRANSIT CALL" a BT Transit Call, handed over from the Operator System to the BT System, initially switched by a BT Tandem Exchange, with no further switching by the BT System, and handed over from the BT System to a Third Party Operator's system. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey a BT Transit Call handed over from the Operator System to the Third Party Operator's system, to the extent that a similar Call is available to BT Customers. 2.2 BT Telephony Calls, BT International Outgoing Calls and BT Operator to Operator Transit Calls are not conveyed pursuant to this Schedule. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 BT's obligation to convey BT ISDN Transit Calls is subject to any Third Party Operator's system and the respective Systems and all relevant Switch Connections of both Parties being suitable for the conveyance of BT ISDN Transit Calls. PAGE 29 of 138 172 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.5 BT shall convey BT Transit Calls during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.6 Each Party shall correct faults which occur in its System which affect the conveyance of BT Transit Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 3. ROUTING 3.1 The conveyance of BT Transit Calls shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 For the conveyance of each BT Transit Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. If at the time when a BT Transit Call is conveyed by BT no rate for such a Call is specified in the Carrier Price List the Operator agrees to pay for such a Call at the rate which is subsequently specified in the Carrier Price List. 4.2 For the conveyance of each BT Transit Call by BT, which is also a Transfer Charge Call, BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List, provided always that BT shall not be obliged to pay for such a Call, if BT has not received payment from a Third Party Operator, and the Operator shall pay no charge to BT pursuant to paragraph 4.1. PAGE 30 of 138 173 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 103 BT OPERATOR TO OPERATOR TRANSIT CALLS VIA THE BT SYSTEM 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT DOUBLE PLUS TANDEM a BT Operator to Operator Transit OPERATOR TO OPERATOR TRANSIT CALL" Call, handed over from the Operator System to the BT System, initially switched by a BT Tandem Exchange, thereafter switched by one or more other BT Tandem Exchanges, and handed over from the BT System to the Operator System; "BT SINGLE TANDEM a BT Operator to Operator Transit OPERATOR TO OPERATOR TRANSIT CALL" Call, handed over from the Operator System to the BT System, initially switched by a BT Tandem Exchange, with no further switching by the BT System, and handed over from the BT System to the Operator System. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey a BT Operator to Operator Transit Call handed over from the Operator System to the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List. 2.2 BT Telephony Calls and BT Transit Calls are not conveyed pursuant to this Schedule. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 BT's obligation to convey BT ISDN Operator to Operator Transit Calls is subject to the respective Systems and all relevant Switch Connections of PAGE 31 of 138 174 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- both Parties being suitable for the conveyance of BT ISDN Operator to Operator Transit Calls. 2.5 BT shall convey BT Operator to Operator Transit Calls during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.6 Each Party shall correct faults which occur in its System which affect the conveyance of BT Operator to Operator Transit Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 3. ROUTING 3.1 The conveyance of BT Operator to Operator Transit Calls, shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 For the conveyance of each BT Operator to Operator Transit Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. PAGE 32 of 138 175 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 104 BT INTERNATIONAL OUTGOING CALLS TO AUTHORISED OVERSEAS SYSTEMS VIA THE BT SYSTEM 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey a BT International Outgoing Call handed over from the Operator System to an Authorised Overseas System, if a rate for such a Call is specified from time to time in the Carrier Price List. 2.2 BT Telephony Calls, BT Transit Calls, BT Operator to Operator Transit Calls and Calls to Ancillary Services are not conveyed pursuant to this Schedule. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 BT's obligation to convey BT ISDN International Outgoing Calls is subject to the Authorised Overseas System and the respective Systems and all relevant Switch Connections of both Parties being suitable for the conveyance of BT ISDN International Outgoing Calls. 2.5 BT shall convey BT International Outgoing Calls during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.6 BT shall be under no obligation to convey BT International Outgoing Calls to destinations which are not available to BT Customers from time to time. 2.7 The Operator shall not hand over to BT and BT shall be under no obligation under this Schedule, to convey BT International Outgoing Calls to those countries listed from time to time in the BT Retail Price List as being available only through the BT Operator. PAGE 33 of 138 176 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.8 Each Party shall correct faults which occur in its System which affect the conveyance of BT International Outgoing Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.9 The Operator shall not hand over to the BT System, a BT International Outgoing Call which is also a Transfer Charge Call, for conveyance to an Authorised Overseas System unless BT has notified the Operator in writing from time to time that BT has an agreement for the connection of Transfer Charge Calls to that Authorised Overseas System. 3. CALL ROUTING 3.1 The conveyance of BT International Outgoing Calls shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 Subject to paragraph 4.3, for the conveyance of each BT International Outgoing Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. 4.2 For the conveyance of each BT International Outgoing Call by BT, which is also a Transfer Charge Call, BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List, provided always that BT shall not be obliged to pay for Transfer Charge Calls where BT has not received payment for such Call from the Authorised Overseas System, and the Operator shall pay no charge to BT pursuant to paragraph 4.1. 4.3 If the Operator, pursuant to the Operator Licence, commences conveying Calls directly to a particular international destination, the Operator shall notify BT in writing. When the Operator commences conveying Calls directly to a particular international destination, the Operator shall pay BT for the conveyance of BT International Outgoing Calls to such destination charges calculated in accordance with the rates for such Calls specified from time to time in the BT Retail Price List. PAGE 34 of 138 177 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 110 FREEFONE (TM) 0800 CALLS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT 0800 SERVICE PROVIDER" a person who has contracted with BT for the delivery of Calls using telephone numbers commencing with the digits 0800. The expression shall also include BT in respect of such telephone numbers if BT has published those numbers as being available to call BT itself in respect of certain BT services; "FREEFONE 0800 CALL" a Call made by a Calling Party dialling 0800 followed by a BT 0800 Service Provider's six digit number (which sets up the Call to the BT 0800 Service Provider) and which if made by a BT Customer on the BT System would be free of charge and paid for by the BT 0800 Service Provider; "FREEFONE 0800 CHARGECARD CALL" a Freefone 0800 Call made by a Calling Party dialling 0800 144 144 to access the BT CHARGECARD(TM) service. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey Freefone 0800 Calls handed over from the Operator System to the appropriate terminal apparatus nominated by the BT 0800 Service Provider or by BT if the terminal apparatus is connected to the BT System, or to the Operator System or a Third Party Operator's system if the terminal apparatus is connected to that System or system. 2.2 Freefone 0800 Calls shall be included in the Traffic Forecast in accordance with Annex A. PAGE 35 of 138 178 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 The Operator shall ensure that its promotional material will not undermine the public perception that Freefone 0800 Calls are free to BT Customers. 2.5 BT shall convey Freefone 0800 Calls handed over from the Operator System during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.6 Each Party shall correct faults which occur in its System which affect the conveyance of Freefone 0800 Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.7 If there are abnormally high volumes of Freefone 0800 Calls that the BT System cannot convey, the Operator may apply network management controls in the Operator System or BT may apply network management controls in the BT System. 2.8 If Operator Customers by means of a Freefone 0800 Call order a Call via INMARSAT or order a BT Telemessage and BT provides such a Call or service, then the Operator shall pay to BT the appropriate charges specified from time to time in the BT Retail Price List. 2.9 The Operator shall only hand over a Freefone 0800 CHARGECARD(TM) Call to the BT System if such a Call originates using an exchange line. 2.10 The Operator shall generate and convey full CLI as requested by the BT System for each Freefone 0800 CHARGECARD(TM) Call handed over to the BT System. For the avoidance of doubt, a Freefone 0800 CHARGECARD(TM) Call handed over from the Operator System to the BT System which is not supported by full CLI, shall not receive an Answer Signal from the BT System, and no payment shall be due to the Operator for such a Call. 3. ROUTING 3.1 The conveyance of Freefone 0800 Calls shall be in accordance with the routing principles specified in Annex A. 3.2 Freefone 0800 Calls handed over to BT by the Operator shall be handed over at a BT Switch Connection located at a BT DMSU which is as near as reasonably practicable to the geographical location from which the Call was initially made or as otherwise may be agreed in writing by the Parties. PAGE 36 of 138 179 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4. CHARGING 4.1 For the conveyance of each Freefone 0800 Call by the Operator, BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. PAGE 37 of 138 180 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 111 LO-CALL(TM) 0345 CALLS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT 0345 SERVICE PROVIDER" a person who has contracted with BT for the delivery of Calls using telephone numbers commencing with the digits 0345. The expression shall also include BT in respect of such telephone numbers if BT has published those numbers as being available to call BT itself in respect of certain BT services; "LO-CALL 0345 CALL" a Call made by a Calling Party dialling 0345 followed by a BT 0345 Service Provider's six digit number (which sets up a Call to the BT 0345 Service Provider) and which if made by a BT Customer on the BT System would be charged at BT's local call charge as specified from time to time in the BT Retail Price List and an additional charge is paid to BT by the BT 0345 Service Provider. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey Lo-Call 0345 Calls handed over from the Operator System to the appropriate terminal apparatus nominated by the BT 0345 Service Provider or by BT if the terminal apparatus is connected to the BT System, or to the Operator System or a Third Party Operator's system if the terminal apparatus is connected to that System or system. 2.2 Lo-Call 0345 Calls shall be included in the Traffic Forecast in accordance with Annex A. PAGE 38 of 138 181 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and clear down sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 The Operator shall ensure that its promotional material will not undermine the public perception that Lo-Call 0345 Calls are charged to BT Customers at BT's local call rates. 2.5 BT shall convey Lo-Call 0345 Calls handed over from the Operator System during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.6 Each Party shall correct faults which occur in its System which affect the conveyance of Lo-Call 0345 Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.7 If there are abnormally high volumes of Lo-Call 0345 Calls that the BT System cannot convey, the Operator may apply network management controls in the Operator System or BT may apply network management controls in the BT System. 3. ROUTING 3.1 The conveyance of Lo-Call 0345 Calls shall be in accordance with the routing principles specified in Annex A. 3.2 Lo-Call 0345 Calls handed over to BT by the Operator shall be handed over at a BT Switch Connection located at a BT DMSU which is as near as reasonably practicable to the geographical location from which the Call was initially made or as otherwise may be agreed in writing by the Parties. 4. CHARGING 4.1 For the conveyance of each Lo-Call 0345 Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. PAGE 39 of 138 182 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 112 BT PREMIUM RATE SERVICE CALLS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "CALLING CENTRE" any location, whether or not authorised, where Calls may be made; "ICSTIS" the Independent Committee for the Supervision of Standards of Telephone Information Services. 2. DESCRIPTION OF SERVICE 2.1 BT shall take all reasonable steps to ensure that a person applying to be a BT PRS Service Provider is adequately vetted prior to being accepted to minimise the risk of PRS Fraud and to ensure compliance with any requirements of ICSTIS. 2.2 BT shall take all reasonable steps to ensure that a person applying to be a BT PRS Service Provider will offer a PRS in good faith. 2.3 The Parties shall take reasonable endeavours to agree adequate safeguards to prevent and detect PRS Fraud and shall record such agreement in a separate document known as the "PRS Fraud Management Manual". If a Party reasonably considers that such safeguards are not adequate then either Party may apply for a review of this Schedule pursuant to paragraph 19.1.3 of the main body of this Agreement. 2.4 Subject to the provisions of this Schedule, BT shall convey BT PRS Calls handed over from the Operator System to the appropriate terminal apparatus nominated by the BT PRS Service Provider or by BT if the terminal apparatus is connected to the BT System, or to the Operator System or a Third Party Operator's system if the terminal apparatus is connected to that System or system. 2.5 BT shall have no obligation to convey BT PRS Calls handed over from the Operator System intended for a BT PRS Service Provider if BT has PAGE 40 of 138 183 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- suspended service to that BT PRS Service Provider or terminated his contract. 2.6 BT PRS Calls shall be included in the Traffic Forecast in accordance with Annex A. 2.7 The Parties shall agree in advance all necessary technical requirements, including Call set-up and clear down sequences, for the conveyance of Calls pursuant to this Schedule. 2.8 BT shall convey BT PRS Calls handed over from the Operator System during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.9 Each Party shall correct faults which occur in its System which affect the conveyance of BT PRS Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.10 If there are abnormally high volumes of BT PRS Calls that the BT System cannot convey, the Operator may apply network management controls in the Operator System or BT may apply network management controls in the BT System. 2.11 Each Party shall comply with the requirements specified from time to time in Appendices 112.1 and 112.2. 3. ROUTING 3.1 The conveyance of BT PRS Calls shall be in accordance with the routing principles specified in Annex A. 3.2 BT PRS Calls handed over to BT by the Operator shall be handed over at a BT Switch Connection located at a BT DMSU which is as near as reasonably practicable to the geographical location from which the Call was initially made or as otherwise may be agreed in writing by the Parties. 4. CHARGING 4.1 Subject to the provisions of this Schedule, for the conveyance of each BT PRS Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. 5. COMMENCEMENT PAGE 41 of 138 184 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.1 BT shall convey BT PRS Calls handed over from the Operator System commencing on a date to be agreed in writing by the Parties. PAGE 42 of 138 185 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 112.1 PRS FRAUD PREVENTION, DETECTION AND ADJUSTMENT 1. NETWORK DEVELOPMENT 1.1 If BT undertakes technical development in relation to BT PRS Calls, BT shall reasonably enhance the facilities for the prevention and detection of PRS Fraud. 2. OPERATIONAL LIAISON 2.1 The Parties shall by monitoring BT PRS Calls take all reasonable steps to prevent and detect PRS Fraud using, without limitation, the criteria specified in Appendix 112.2. 3. BT DETECTION AND NOTIFICATION 3.1 If BT suspects PRS Fraud taking into account the criteria specified in Appendix 112.2 it shall immediately pass to the Operator, for each Calling Centre identified, the following information: 3.1.1 the identity of the Calling Centre; 3.1.2 the estimated total duration of the relevant BT PRS Calls; 3.1.3 the dates when the relevant BT PRS Calls were made; 3.1.4 the telephone number or numbers of the relevant BT PRS Service Provider; 3.1.5 the identity of the relevant BT PRS Service Provider; 3.1.6 such other information as BT considers relevant; 3.1.7 such other information reasonably requested by the Operator. 4. OPERATOR DETECTION AND NOTIFICATION 4.1 If the Operator suspects PRS Fraud taking into account the criteria specified in Appendix 112.2 it shall immediately pass to BT, for each Calling Centre identified, the following information: 4.1.1 the identity of the Calling Centre; PAGE 43 of 138 186 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.1.2 the estimated total duration of the relevant BT PRS Calls; 4.1.3 the dates when the relevant BT PRS Calls were made; 4.1.4 the telephone number or numbers of the relevant BT PRS Service Provider; 4.1.5 the identity of the relevant Operator Customer; 4.1.6 such other information as the Operator considers relevant; 4.1.7 such other information reasonably requested by BT. 5. RESTRICTION ON USE OF INFORMATION 5.1 Any information passed between the Parties in accordance with paragraphs 3 and 4 shall only be used for the following purposes: 5.1.1 to monitor, prevent or detect PRS Fraud; 5.1.2 to assist the investigation of PRS Fraud and to undertake criminal prosecutions if PRS Fraud is established; 5.1.3 to undertake civil proceedings to effect recovery of losses resulting from PRS Fraud. 6. NOMINATED PARTIES 6.1 Any information required to be passed between the Parties in accordance with paragraphs 3 and 4 shall be collated by the nominated representative of one Party and sent to the nominated representative of the other Party in accordance with the PRS Fraud Management Manual. 7. FINANCIAL ADJUSTMENT 7.1 If a Party has passed information to the other Party in accordance with paragraphs 3 and 4, then for information so passed which relates to the current Billing Period and subject to the information having been passed to BT within 2 weeks of the end of that Billing Period then the Operator may withhold payment for the identified BT PRS Calls; 7.1.1 for a period of not more than 6 months commencing with the date of the first bill following the end of the then current Billing Period; or 7.1.2 until the Operator receives payment from the Operator Customer whichever duration is less. PAGE 44 of 138 187 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7.2 The Operator shall take all reasonable steps to recover any outstanding charges for BT PRS Calls. 7.3 If after the period of 6 months specified in paragraph 7.1.1 the Operator has not received payment from the Operator Customer, BT may: 7.3.1 unconditionally release the Operator from the obligation to pay; or 7.3.2 continue suspension of the Operator's obligation to pay; or 7.3.3 require the Operator to assign (at no cost) to BT the indebtedness of the Operator Customer in consideration of BT releasing the Operator from its obligation to pay such outstanding charges for such Operator Customer. 7.4 In the event of any dispute relating to the operation of this paragraph 7 either Party may serve a notice on the other requiring any matters in dispute to be referred to arbitration in London by a single arbitrator appointed by agreement between the Parties or in default of agreement upon the application of either Party by the President for the time being of the Law Society of England in accordance with and subject to the Arbitration Acts 1950 - 1979. PAGE 45 of 138 188 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 112.2 The following are indicators of PRS Fraud in relation to any BT PRS Service Provider and Calling Party: BT PRS SERVICE PROVIDER 1. For each of the first 3 months after commencement of service the number of BT PRS Calls delivered to any new BT PRS Service Provider exceed by 25% (or such other percentage as the Parties may agree in writing) or more the average number of BT PRS Calls to similar Premium Rate Services ascertained after the first month and monthly thereafter. 2. After the first 3 months the number of BT PRS Calls delivered to any BT PRS Service Provider increases at a rate of 25% or more from one month to the next. 3. A high proportion of BT PRS Calls delivered to any BT PRS Service Provider originate at a small number of Calling Centres whether or not limited in geographical location. 4. The average duration of BT PRS Calls delivered to any BT PRS Service Provider differs significantly from that of BT PRS Calls to similar Premium Rate Services or there are repeated Calls of similar duration. 5. BT PRS Calls delivered to any BT PRS Service Provider appear to originate without promotion of the Premium Rate Service. 6. A significant proportion of BT PRS Calls delivered to any BT PRS Service Provider originate at payphones or use payment systems other than a standard telephone bill CALLING PARTIES 1. A small number of Calling Centres generate a high proportion of BT PRS Calls for delivery to any BT PRS Service Provider. 2. A small number of Calling Centres generate a high volume of BT PRS Calls for delivery to any BT PRS Service Provider. 3. A high proportion of BT PRS Calls delivered to any BT PRS Service Provider are generated at a small number of Calling Centres whether or not limited in geographical location. PAGE 46 of 138 189 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4. The average duration of BT PRS Calls delivered to any BT PRS Service Provider differs significantly from that of BT PRS Calls to similar Premium Rate Services or there are repeated Calls of similar duration. 5. BT PRS Calls delivered to any BT PRS Service Provider appear to originate without promotion of the Premium Rate Service. 6. A significant proportion of BT PRS Calls delivered to any BT PRS Service Provider originate at payphones or use payment systems other than a standard telephone bill. PAGE 47 of 138 190 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 116 NATIONAL CALL(TM) 0990 CALLS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT 0990 SERVICE PROVIDER" a person who has contracted with BT for the delivery of Calls using telephone numbers commencing with the digits 0990. The expression shall also include BT in respect of such telephone numbers where BT has published those numbers as being available to call BT itself in respect of certain BT services. "0990 CALL" a Call made by a Calling Party dialling 0990 followed by a BT 0990 Service Provider's six digit number (which sets up the Call to the BT 0990 Service Provider) and which if such a Call were made by a BT Customer on the BT System would be charged at BT's 'b' Rate as specified from time to time in the BT Retail Price List and an additional charge is paid by the BT 0990 Service Provider; 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey 0990 Calls received from the Operator System to the appropriate terminal apparatus nominated by the BT 0990 Service Provider or by BT where the terminal apparatus is connected to the BT System, or to the Operator System or a Third Party Operator's system where the terminal equipment is connected to that System or system. 2.2 0990 Calls shall be included in the Traffic Forecast in accordance with Annex A. PAGE 48 of 138 191 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 BT shall convey 0990 Calls handed over from the Operator System during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.5 Each Party shall correct faults which occur in its System which affect the conveyance of 0990 Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.6 If there are abnormally high volumes of 0990 Calls that the BT System cannot convey, the Operator may apply network management controls in the Operator System or BT may apply network management controls in the BT System. 3. ROUTING 3.1 The conveyance of 0990 Calls shall be in accordance with the routing principles specified in Annex A. 3.2 0990 Calls handed over to BT by the Operator shall be handed over at a BT Switch Connection located at a BT DMSU which is as near as reasonably practicable to the geographical location from which the Call was initially made or as otherwise may be agreed in writing by the Parties. 4. CHARGING 4.1 For the conveyance of each 0990 Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. PAGE 49 of 138 192 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 117 PHONE BASE(TM) CALLS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT PHONE BASE SERVICE" a service comprising access to a computer database containing the entries from time to time available for the alphabetical section of BT Phone Books; "PHONE BASE CALLS" Calls to the telephone number 0910 210910 to access the BT Phone Base Service. 2. DESCRIPTION OF PRODUCT 2.1 Subject to the provisions of this Schedule, BT shall convey Phone Base Calls handed over from the Operator System to the BT Phone Base Service. 2.2 Phone Base Calls shall be included in the Traffic Forecast in accordance with Annex A. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 BT shall convey Phone Base Calls handed over from the Operator System during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.5 Each Party shall correct faults which occur in its System which affect the conveyance of Phone Base Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.6 If there are abnormally high volumes of Phone Base Calls that the BT System cannot convey, the Operator may apply network management controls in the Operator System or BT may apply network management controls in the BT System. PAGE 50 of 138 193 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.7 Access to the BT Phone Base Service will only be available to those Operator Customers who have contracted with BT for the provision of the BT Phone Base Service and to whom appropriate security codes have been issued to enable use of the BT Phone Base Service. 3. ROUTING 3.1 The conveyance of Phone Base Calls shall be in accordance with the routing principles specified in Annex A. 3.2 Phone Base Calls handed over to BT by the Operator shall be handed over at a BT Switch Connection located at a BT DMSU. 4. DURATION 4.1 Conveyance of Phone Base Calls pursuant to this Schedule shall cease if BT has given not less than 6 months' written notice to the Operator of its intention to cease to convey such Calls, and BT ceases to convey Phone Base Calls from BT Customers. 5. CHARGING 5.1 For the conveyance of each Phone Base Call by BT, the Operator shall pay a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. PAGE 51 of 138 194 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 118 BT TIMELINE(TM) SERVICE 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT TIMELINE CALLS" Calls to the BT Timeline Service accessed by means of the digits 123 for BT Customers; "BT TIMELINE SERVICE" BT's speaking clock service which is available to BT Customers. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, BT shall convey BT Timeline Calls received from the Operator System to the BT Timeline Service. 2.2 BT Timeline Calls shall be included in the Traffic Forecast in accordance with Annex A. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 BT shall convey BT Timeline Calls handed over from the Operator System during those periods of time and at the same standard and quality of service as BT conveys similar Calls. 2.5 Each Party shall correct faults which occur in its System which affect the conveyance of BT Timeline Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 2.6 If there are abnormally high volumes of BT Timeline Calls that the BT System cannot convey, the Operator may apply network management controls in the Operator System or BT may apply network management controls in the BT System. PAGE 52 of 138 195 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3. ROUTING 3.1 The conveyance of BT Timeline Calls shall be in accordance with the routing principles specified in Annex A. 3.2 BT Timeline Calls handed over to BT by the Operator shall be handed over at a BT Switch Connection located at a BT DMSU. 3.3 If the Operator conveys BT Timeline Calls from the Operator System to the BT System it shall only hand over the Call using the digits 123. 4. DURATION 4.1 Conveyance of BT Timeline Calls pursuant to this Schedule shall cease if BT has given not less than 6 months written notice to the Operator of its intention to cease to convey such Calls, and BT ceases to convey BT Timeline Calls from BT Customers. 5. CHARGING 5.1 For the conveyance of each BT Timeline Call by BT, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. PAGE 53 of 138 196 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 120 NATIONAL OPERATOR ASSISTANCE SERVICE 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D except as shown: "ADC CALL CATEGORY" one of Local ADC or National ADC, as appropriate; "BT FREEFONE(TM) NAME SERVICE a person who has contracted with PROVIDER" BT for the delivery of Calls using a BT Operator by quoting Freefone(TM) Name. The expression shall also include BT in respect of Freefone(TM) Names if BT has published those as being available to call BT itself in respect of certain BT services; "FREEFONE(TM) NAME" a name beginning with the word "Freefone(TM)" and which has been allocated by BT to a BT Freefone(TM) Name Service Provider which is used to set up a Call to the BT Freefone(TM) Name Service Provider which if made by a BT Customer on the BT System would be free of charge and paid for by the BT Freefone(TM) Name Service Provider; "LOCAL ADC" the contributions towards BT's Access Deficit that apply to Calls received from the Operator System ("actual Calls") where, if Calls (other than Indirect Access Calls) were conveyed in the opposite direction between the same originating and terminating points as those actual Calls ("reverse Calls"), such reverse Calls would be classified as local calls in the BT Retail Price List; PAGE 54 of 138 197 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "NATIONAL ADC" the contributions towards BT's Access Deficit that apply to Calls received from the Operator System ("actual Calls") where, if Calls (other than Indirect Access Calls) were conveyed in the opposite direction between the same originating and terminating points as those actual Calls ("reverse Calls"), such reverse Calls would be classified as national calls in the BT Retail Price List; "NOA SERVICE" the Operator Assistance Service relating to Calls originating and terminating within the British Isles as specifically described in paragraph 2 of this Schedule. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the provision by BT to the Operator of access to the NOA Service from the Operator System. 2.1.1 NOA Service shall only be available to be accessed by Calling Parties having a telephone number conforming to the UK national numbering scheme. 2.1.2 Except where expressly stated otherwise all Calls to the NOA Service shall attract the charge for the NOA Service specified from time to time in the BT Carrier Price List. 2.1.3 Where the Operator permits Calling Parties to access the NOA Service from payphones connected to or forming part of the Operator System, BT shall only be obliged to provide the services set out in paragraphs 2.3.2 and 2.3.4. 2.2 Subject to paragraph 2.3, Calling Parties will be able to access the NOA Service in order to obtain assistance in completing Calls to persons in the British Isles who can be reached via the BT System. 2.3 The NOA Service shall comprise the following: 2.3.1 ASSISTANCE CALLS A Calling Party may request the BT Operator to connect the following types of Call: (a) A BT Basic Telephony Call; PAGE 55 of 138 198 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (b) A BT Basic Transit Call; (c) An Operator Basic Telephony Call; (d) A BT Basic Operator to Operator Transit Call; (e) An Operator Basic Transit Call; (f) A Number Translation Services Call; (g) A BT Basic International Outgoing Call to the Republic of Ireland; except that BT PRS Calls, Operator PRS Calls and Calls to PRS services run by Third Party Operators shall not be connected. A Calling Party may request the BT Operator to provide assistance in connection of such a Call referred to above where a previous attempt failed (as, for instance, where there has been a continuous engaged tone, number unobtainable tone, continuous ringing tone and no reply, no tone or wrong number), or re-connection of such a Call in the event of prior unwarranted disconnection by one or more of the Telecommunication Systems involved in the connection chain. The assistance provided under this paragraph 2.3.1 shall only be in respect of Calls for which BT provides the same assistance service for its Customers. BT shall offer refunds of Call charges to the Operator in respect of its Customers in circumstances where BT would offer refunds to BT Customers. 2.3.2 TRANSFER CHARGE CALLS A Calling Party may request the BT Operator to attempt to set up a Transfer Charge Call to a person having a telephone number conforming to the UK national numbering scheme. The charge for the NOA Service specified from time to time in the Carrier Price List will not be payable for successful Transfer Charge Calls. The NOA Service shall not connect Transfer Charge Calls to the following: (a) answering machines (unless permitted by the initial message pre-recorded by the person responsible for the called number); (b) payphones; PAGE 56 of 138 199 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (c) the Republic of Ireland; (d) Number Translation Services Calls; (e) persons using certain Land Mobile Radio Services; (f) numbers on paging systems; 2.3.3 ALARM CALLS A request can be made to the BT Operator for an alarm call to be made at a specified time. The alarm call will be attempted at or near the required time, but in any event no more than five minutes earlier or later than the time specified. However, alarm calls can only be booked on ordinary fixed exchange lines within the British Isles (excepting the Republic of Ireland) and can only be charged to the Calling Party's number. Alarm calls will be charged to the Operator at the price specified from time to time in the Carrier Price List, when booked. Refunds of the charge shall be given to the Operator if an alarm call is cancelled, subject to the cancellation being made prior to midnight on the day preceding the day for which the alarm call has been booked. 2.3.4 BT FREEFONE(TM) NAME SERVICE A request can be made to the BT Operator to connect a Call using the BT Freefone(TM) Name Service. The BT Operator will connect the Call or if the telephone number is engaged or unavailable, inform the Calling Party. The charge for the NOA Service specified from time to time in the Carrier Price List will not be payable for Calls to NOA Service where the NOA Service is only used to access the BT Freefone(TM) Name Service. The Operator shall ensure that any promotional material issued by it will not undermine the public perception that the conveyance of Calls to the BT Freefone(TM) Name Service is free to BT Customers. 2.4 If BT makes a material change to the NOA Service that BT provides to its own Customers, it shall give the Operator 6 months' notice of such change. The notice of such change shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3. BT'S OBLIGATIONS PAGE 57 of 138 200 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.1 BT shall provide the NOA Service to the Operator at all times. In other aspects it shall provide the same standard and quality of service as BT provides such service to the generality of BT Customers calling the NOA Service from that locality. 3.2 Subject to the provisions of this Schedule, BT shall convey Calls for the NOA Service by means of the BT System to an OCHC. BT shall be under no obligation to convey any Call to the NOA Service which is a type of Call that BT does not convey to such service for its Customers. 3.3 BT shall use its reasonable endeavours to ensure that 90 per cent of all Calls (except those for which there were no queue places available in the automatic call distribution system) to the NOA Service (averaged over a 24 hour period) will be answered within 15 seconds, 7 days per week (with the exception of Christmas Day when the target percentage shall be 70 per cent). The balance of all such Calls shall be answered by the BT Operator as soon as reasonably possible after the 15 second period. 3.4 On written request from the Operator, BT shall provide statistics of the percentage of Calls actually answered within the time periods specified in paragraph 3.3 for the OCHC which normally deals with Calls to the NOA Service for the relevant BT Switch Connection. 3.5 BT shall, correct faults which occur in the BT System which affect the provision of the NOA Service, in accordance with BT's normal engineering practices. For the avoidance of doubt, BT does not warrant that the BT System is or will be free from faults. 3.6 Procedures for the provision by BT to the Operator of details of Calls to the NOA Service and refunds handled by BT Operators are set out in Annex B and the procedures for operational matters and Customer complaints are set out in the Operator Services Manual. 3.7 BT shall provide training to BT Operators for the purpose of providing services under this Schedule. 4. THE OPERATOR'S OBLIGATIONS 4.1 Where the Operator conveys Calls to access the NOA Service it shall deliver the Calls to a BT Switch Connection at a BT DMSU in accordance with Annex A. 4.2 If Operator Customers, by means of a Call passed to BT to order a BT Telemessage, and BT provides such a service the Operator shall pay to BT the appropriate charge specified from time to time in the BT Retail Price List. PAGE 58 of 138 201 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.3 The Operator shall, where faults occur in the Operator System which affect the provision of the NOA Service, correct them in accordance with the Operator's normal engineering practices. For the avoidance of doubt, the Operator does not warrant that the Operator System is or will be free from faults. 4.4 Where the Operator permits access to the NOA Service from payphones connected to or forming part of the Operator System, the Operator shall ensure the payphone sends a tone, of a form to be agreed between the Parties, to indicate to the BT Operator that the Calling Party is using a payphone. 4.5 Where the Operator wishes BT to inform Calling Parties, in response to enquiries, of the condition of Operator Customer's telephone lines (e.g. out of order, terminated etc.) it shall provide BT with a telephone number for use by the BT Operator for making such enquiries. This telephone number will be used solely by the BT Operator and shall not be disclosed. 5. COMMENCEMENT & TERMINATION 5.1 BT shall provide the NOA Service to the Operator as detailed in this Schedule on the later of the following: 5.1.1 a date 3 months after the date this Schedule was incorporated into the Agreement; or 5.1.2 the first Ready for Service Date; or 5.1.3 such other date as the Parties may agree in writing. 5.2 The Operator may terminate its access to the NOA Service under this Schedule by giving 3 months' written notice to BT. 6. CHARGING 6.1 For the services provided by the BT Operator except for those specifically stated to be free of such charges, the Operator shall pay BT for each Call the charge for the NOA Service as specified from time to time in the Carrier Price List. In addition, the following are payable: 6.1.1 For the onward connection of Calls stated in paragraph 2.3.1 the Operator or BT, as appropriate shall pay, for each successful Call, the charges in accordance with the charge as specified from time to time in the Carrier Price List for the appropriate Call. 6.1.2 For the provision of Transfer Charge Calls by the NOA Service, and for the BT Freefone(TM) Name Service, BT shall pay the Operator for PAGE 59 of 138 202 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- each successful Call, the appropriate charge specified from time to time in the Carrier Price List. 7. CONTRIBUTIONS TO BT'S ACCESS DEFICIT 7.1 Where BT provides assistance pursuant to paragraph 2.3.1 which includes onward connection of a BT Basic Telephony Call and subject to the provisions of this paragraph 7, the Operator shall pay a contribution to BT's Access Deficit at the rate specified from time to time for the ADC Call Category, in the Carrier Price List. For these purposes, the ADC Call Category shall be ascertained at the time when the Answer Signal is generated. 7.2 If, prior to the date of the Agreement, either Party has requested the Director General pursuant to Condition 13.5A of the BT Licence to reduce the contribution to be made by the Operator towards BT's Access Deficit, then payment of the contribution referred to in such request shall be suspended until the Director General has dealt with the request. 7.3 If, following a request referred to in paragraph 7.2, the Director General determines not to reduce the contribution or determines that a partial contribution shall be payable by the Operator towards BT's Access Deficit, such contribution shall be payable accordingly with effect from the date that the services set out in this Schedule commenced. The Operator shall pay any outstanding contribution not later than one month after the date of such determination. 7.4 If, following a request referred to in paragraph 7.2, the Director General determines that no contribution shall be payable by the Operator towards BT's Access Deficit no such contribution shall be payable under paragraph 7.1. 7.5 If the Director General at any time determines pursuant to Condition 13.5A of the BT Licence that the contribution payable by the Operator towards BT's Access Deficit should be varied or a contribution becomes payable in accordance with Condition 13.5A of the BT Licence then the Agreement shall be varied accordingly. 7.6 The Operator shall have no liability to pay a contribution to BT's Access Deficit in respect of Calls which have originated on the system of a Third Party Operator and are conveyed over the Operator System to the BT System, provided that: PAGE 60 of 138 203 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7.6.1 subject as provided in paragraph 7.6.4 below the Operator shall not agree to convey over the Operator System to the BT System Calls originated on the system of a Third Party Operator or first conveyed in the UK by the system of a Third Party Operator unless that operator shows to the Operator's reasonable satisfaction that it has entered into an agreement with BT to pay a contribution to BT's Access Deficit for all Calls originated on the system of that Third Party Operator, or first conveyed in the UK by the system of that Third Party Operator, and conveyed to their ultimate destination by means of the BT System (whether by direct connection between the system of that Third Party Operator and the BT system or by transit through any other system); 7.6.2 if the Director General (following notification from BT) notifies the Operator that a Third Party Operator, having entered into an agreement as described in paragraph 7.6.1, has failed to make a contribution to BT's Access Deficit as required by that agreement and that all provisions in that agreement for the resolution of disputes have been exercised and have failed, then the Operator shall as quickly as reasonably practicable cease to convey Calls originated on the system of that Third Party Operator or first conveyed in the UK by that operator's system to the BT System. The Director General shall not notify the Operator pursuant to this paragraph if, having heard representations from the Third Party Operator concerned, he is satisfied that the payment demanded by BT from the Third Party Operator has not been calculated in accordance with this proviso, save that it shall be deemed to be conclusive proof that the payment has been properly calculated if BT obtains judgement in a court of competent jurisdiction for its recovery as a debt and any appeal against that judgement has been finally disposed of; 7.6.3 the Operator shall provide BT at BT's expense such information about those Calls described in paragraph 7.6.1 as the Operator is practicably and rightfully able to provide and as BT may reasonably require to calculate the amount of contribution to the Access Deficit so payable. During such time as the Operator is unable to provide a record of the Calls described in paragraph 7.6.1, it shall provide information to BT for the purposes of this paragraph on the basis of a method of estimation determined by the Director General after consulting with such other persons as he considers appropriate; 7.6.4 the obligation of the Operator in paragraph 7.6.1 shall not apply to Calls which the Director General has determined or BT has agreed should not give rise to a contribution to BT's Access Deficit by any such Third Party Operator and this paragraph shall cease to apply if BT ceases to be entitled by virtue of Condition 13 of the BT Licence to recover from the Third Party Operator a contribution to its Access Deficit. PAGE 61 of 138 204 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7.7 BT shall indemnify and keep indemnified the Operator against any liability claim, loss or damage resulting from the Operator's performance of obligation under paragraph 7.6.1 or 7.6.2 in circumstances where in case of default or negligence of BT the Operator would not have been so obliged to prevent or cease conveyance of a Call emanating from the Third Party Operator. 7.8 The Parties agree that either Party may initiate a review of paragraphs 7.6 and 7.7 pursuant to paragraph 19.1.3 of the main body of the Agreement. PAGE 62 of 138 205 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 121 DIRECTORY ENQUIRY SERVICE 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BLIND OR DISABLED PERSON" a person fulfilling criteria determined by BT from time to time and registered with BT permitting use of the DQ Service by that person at no charge; "DQ CENTRE" a BT site where DQ Operators answer Calls to the DQ Service; "DQ OPERATOR" a person who answers Calls to the DQ Service; "DQ SERVICE" the directory enquiry service relating to telephone numbers within the British Isles. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the provision by BT to the Operator of access to the DQ Service. The DQ Service shall only be available to be accessed by persons having a telephone number conforming to the UK national numbering scheme. 2.2 A person may request a search for the telephone or telex numbers of up to two persons listed as telephony or telex customers in the British Isles provided that sufficient information is given to enable the DQ Operator to carry out a search. If the search is successful, the Calling Party will be supplied with the requested number. However if the number is listed as an ex-directory number the Calling Party will be so informed, but the number will not be disclosed. 2.3 Subject to paragraph 2.4 below, refunds of the DQ Service charges set out from time to time in the Carrier Price List shall be made by BT where the following circumstances are brought to BT's attention by the Operator Customer: PAGE 63 of 138 206 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.3.1 if a DQ Operator provides to the Calling Party information that is inconsistent with correct information that was available at the DQ Centre; 2.3.2 if a DQ Operator is unable to trace the telephone number but the Calling Party is able to obtain the number from a BT Phone Book or another DQ Operator that same day; 2.3.3 if the Call is misrouted by the BT System to the DQ Service; 2.3.4 if the Call has been cut off by the BT System on a Call to the DQ Service or bad transmission over the BT System prevents the Calling Party from hearing the DQ Operator's response; 2.3.5 if, due to BT error in processing any information that BT has agreed to enter in a BT Phone Book, the number that is required is missing or incorrect (e.g. numbers transposed) in such a directory; 2.3.6 if the DQ Operator reasonably feels that the Calling Party has experienced poor DQ Service or exceptional difficulty; 2.3.7 if during the course of a search by the DQ Operator there is a computer failure and the DQ Operator is unable to deliver the number; 2.3.8 if the Calling Party is referred by the DQ Operator to the BT "Talking Pages" Service; 2.3.9 if the Calling Party asks for the number of a particular BT department or front office; 2.3.10 if the Calling Party requests Number Range information and the Call to the DQ Service was caused by a BT code change or bulk number change. 2.4 Refunds will only be made if the Calling Party identifies to the DQ Operator dealing with the refund the originating telephone number used by the Calling Party to make the Call to the DQ Centre. 2.5 Directory Enquiry Service for the Blind or Disabled 2.5.1 BT shall register as a Blind or Disabled Person those persons who apply to a BT registration point for consideration by BT to be registered, subject to the person fulfilling the same criteria as BT Customers qualifying for registration. 2.5.2 BT shall make no separate charge pursuant to this Schedule for access to the DQ Service where: PAGE 64 of 138 207 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- a) the Call is received at the specialised DQ bureau dealing with Calls from Blind or Disabled Persons to the DQ Service; and b) the Calling Party is a Blind or Disabled Person. No refunds will be offered to the Operator in respect of the provision of the DQ Service to Blind or Disabled Persons. 2.6 If BT makes a material change to the DQ Service that BT provides to its own Customers, it shall give the Operator 6 months notice of such change. The notice of such change shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3. BT'S OBLIGATIONS 3.1 BT shall provide the DQ Service at all times. In other aspects it shall provide the same standard and quality of service as BT makes available to BT Customers making Calls to the DQ Service from that locality. 3.2 Subject to the provision of this Schedule, BT shall convey Calls for the DQ Service received from the Operator System to a DQ Centre. BT shall be under no obligation to convey any Call to the DQ Service which is a type of Call that BT does not convey to such service for its Customers. 3.3 BT shall use its reasonable endeavours to ensure that 90 per cent. of all Calls (except those for which there were no queue places available in the automatic call distribution system) to the DQ Service (averaged over a 24 hour period) will be answered within 15 seconds, 7 days per week (with the exception of Christmas Day when the target percentage shall be 70 per cent.). The balance of all such Calls shall be answered by the DQ Operator as soon as reasonably possible after the 15 second period. 3.4 On written request from the Operator, BT shall provide statistics of the percentage of Calls actually answered within the time periods specified in paragraph 3.3 for the OCHC which normally deals with Calls to the DQ Service for the relevant BT Switch Connection. 3.5 BT shall correct faults which occur in the BT System which affect the DQ Service in accordance with BT's normal engineering practices. For the avoidance of doubt, BT does not warrant that the BT System is, or will be, free from faults. 3.6 Procedures for the provision by BT to the Operator of details of Calls to the DQ Service handled by DQ Operators shall be as set out in Annex B whereby BT shall pay refunds to the Operator. Refund information shall be included in TIBS Billing Information and Refund Reports. PAGE 65 of 138 208 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4. THE OPERATOR'S OBLIGATIONS 4.1 Where the Operator conveys a Call to the DQ Service to BT, the Operator shall convey such a Call to a BT Switch Connection at a BT DMSU in accordance with Annex A. 4.2 The Operator shall pay to BT for each Call to the DQ Service the appropriate charges specified from time to time in the Carrier Price List. 4.3 The Operator shall, correct faults which occur in the Operator System which affect the DQ Service in accordance with the Operator's normal engineering practices. For the avoidance of doubt, the Operator does not warrant that the Operator System is, or will be, free from faults. 5. COMMENCEMENT & TERMINATION 5.1 BT shall provide the DQ Service as detailed in this Schedule on the later of the following: 5.1.1 a date 3 months after the date this Schedule was incorporated into the Agreement; or 5.1.2 the first Ready for Service Date; or 5.1.3 such other date as the Parties may agree in writing. 5.2 The Operator may terminate access to the DQ service provided under this Schedule by giving 3 months written notice to BT. PAGE 66 of 138 209 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 122 INTERNATIONAL OPERATOR ASSISTANCE SERVICE 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "IOA SERVICE" the international operator assistance service relating to Calls to destinations outside the British Isles and other services as specifically described in paragraph 2 of this Schedule. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the provision by BT to the Operator of access to the IOA Service. 2.1.1 IOA Service shall only be available to be accessed by persons having a telephone number conforming to the UK national numbering scheme. 2.1.2 Where the Operator permits Calling Parties to contact the IOA Service from payphones connected to or forming part of the Operator System, BT shall only be obliged to provide the services set out in paragraphs 2.3.3 and 2.3.6. 2.2 Subject to paragraph 2.3, a person will be able to contact the IOA Service in order to obtain assistance in completing Calls to Customers of an Authorised Overseas System who can be reached through the BT System and to obtain time difference advice. 2.3 BT shall provide the IOA Service which shall comprise the following: 2.3.1 Assistance Calls The Calling Party can request connection to an international telephone number, or assistance from overseas operators, or assistance in connection where a previous attempt failed or re-connection to a telephone number in the event of prior unwarranted disconnection by one or more of the Telecommunication Systems involved in the connection chain or assistance in sending facsimile messages to PAGE 67 of 138 210 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- destinations outside the British Isles. Call charges are payable in whole minutes with a minimum charge of that for a three minute Call. 2.3.2 Personal Calls to international numbers The Calling Party can request the BT Operator to connect them to a named person or extension outside the British Isles. A personal call fee is payable for each Call attempt that is answered whether or not the Call is connected to the named person or extension. The Call charges specified from time to time in the Carrier Price List are payable in whole minutes with a minimum charge of that for a three minute Call. 2.3.3 International Transfer Charge Calls The Calling Party can request the BT Operator to arrange a Transfer Charge Call to an overseas destination, except that international Transfer Charge Calls cannot be made to payphones, services run by INMARSAT, a ship in port, the Republic of Ireland or to territories or numbers where there is no agreement to provide such Calls with the relevant telecommunications operators. 2.3.4 Calls via INMARSAT The Calling Party can request the BT Operator to connect a Call to a ship at sea which possesses suitable satellite communication equipment. 2.3.5 Advance Booking of International Calls The Calling Party can request the BT Operator to arrange connection of an International Call to a specific destination for a particular date and time. 2.3.6 Time Difference Advice The Calling Party can request the BT Operator for the local time in a particular country. 2.4 If BT makes a material change to the IOA Service that BT provides to BT Customers, it shall give the Operator 6 months notice of such change. The notice of such change shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3. BT'S OBLIGATIONS PAGE 68 of 138 211 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.1 BT shall provide the IOA Service at all times. In other aspects it shall provide the same standard and quality of service as BT makes available to BT Customers calling the IOA Service from that locality. 3.2 Subject to the provisions of this Schedule, BT shall convey Calls for the IOA Service by means of the BT System to an IOA Service centre. BT shall be under no obligation to convey any Call to the IOA Service which is a type of Call that BT does not convey to such service for its Customers. 3.3 BT shall use its reasonable endeavours to ensure that 90 per cent. of all Calls (except those for which there were no queue places available in the automatic call distribution system) to the IOA Service (averaged over a 24 hour period) will be answered within 15 seconds, 7 days per week (with the exception of Christmas Day when the target percentages shall be 70 per cent.). The balance of all such Calls shall be answered by the BT Operator as soon as reasonably possible after the 15 second period. 3.4 BT shall correct faults which occur in the BT System which affect the provision of the IOA Service in accordance with BT's normal engineering practices. For the avoidance of doubt, BT does not warrant that the BT System is, or will be, free from faults. 3.5 Procedures for the provision by BT to the Operator of details of Calls to the IOA Service handled by BT Operators are set out in Annex B and the procedures for operational matters and Customer complaints are set out in the Operator Services Manual. 4. THE OPERATOR'S OBLIGATIONS 4.1 Where the Operator conveys Calls to access the IOA Service it shall hand over Calls to a BT Switch Connection at a BT DMSU in accordance with Annex A. 4.2 The Operator shall correct faults which occur in the Operator System which affect the provision of the IOA Service in accordance with the Operator's normal engineering practices. For the avoidance of doubt, the Operator does not warrant that the Operator System is, or will be, free from faults. 4.3 Where the Operator permits access to the IOA Services from payphones connected to or forming part of the Operator System, the Operator shall ensure the payphone sends a tone, of a form to be agreed between the Parties, to indicate to the BT Operator that the Calling Party is using a payphone. 5. CHARGING PAGE 69 of 138 212 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.1 For the service provided by way of the IOA Service, except for international Transfer Charge Calls, the Operator shall pay BT for each Call the charges specified from time to time the Carrier Price List. 5.2 For each international Transfer Charge Call set up by the BT Operator, BT shall pay the Operator for each successful Call the appropriate rate specified from time to time and the Operator shall pay no charge to BT pursuant to paragraph 5.1 in the Carrier Price List. 6. COMMENCEMENT & TERMINATION 6.1 BT shall provide the IOA Service as detailed in this Schedule on the later of the following: 6.1.1 a date 3 months after the date this Schedule was incorporated into the Agreement; or 6.1.2 the first Ready for Service Date; or 6.1.3 such other date as the Parties may agree in writing. 6.2 The Operator may terminate access to the IOA service provided under this Schedule by giving 3 months written notice to BT. PAGE 70 of 138 213 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 123 INTERNATIONAL DIRECTORY ENQUIRY SERVICE 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BLIND OR DISABLED PERSON" a person fulfilling criteria determined by BT from time to time and registered with BT permitting use of the IDQ Service by that person at no charge; "IDQ CENTRE" a BT site where IDQ Operators answer Calls to the IDQ Service; "IDQ OPERATOR" a person who answers Calls to the IDQ Service; "IDQ SERVICE" the international directory enquiry service relating to telephone numbers outside the British Isles which is more specifically described in paragraph 2 below. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the provision by BT to the Operator of access to the IDQ Service. The IDQ Service shall only be available to be accessed by persons having a telephone number conforming to the UK national numbering scheme. 2.2 A person may request a search for the telephone or telex numbers of up to two persons listed as telephony or telex Customers of operators of Authorised Overseas Systems, provided that sufficient information is given to enable the IDQ Operator to carry out a search. If the search is successful, the Calling Party will be supplied with the requested number. However if the number is listed as an ex-directory number the Calling Party will be so informed, but the number will not be disclosed. 2.3 Subject to paragraph 2.4 below, refunds of the IDQ Service charge specified from time to time in the Carrier Price List shall be made to the Operator by PAGE 71 of 138 214 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- BT where the following circumstances are brought to BT's attention by the Operator Customer: 2.3.1 if an IDQ Operator provides to the Calling Party information that is inconsistent with correct information that was available at the IDQ Centre; 2.3.2 if the Call is misrouted by the BT System to the IDQ Service; 2.3.3 if the Calling Party has been cut off by the BT System on a Call to the IDQ Service or bad transmission over the BT System prevents the Calling Party from hearing the IDQ Operator's response; 2.3.4 if the IDQ Operator reasonably feels that the Calling Party has experienced poor service or exceptional difficulty; 2.3.5 if the Calling Party asks for the number of a particular BT department or front office; 2.3.6 if the Calling Party makes a Call to enquire about the progress of an earlier request for information where the IDQ Operator has offered to ring with the information. 2.4 Refunds shall be made only if the Calling Party identifies to the IDQ Operator dealing with the refund the originating telephone number used by the Calling Party to make the Call to the IDQ Centre. 2.5 International Directory Enquiry Service for the Blind or Disabled 2.5.1 BT shall register as a Blind or Disabled Person those persons who apply to a BT registration point for consideration by BT to be registered, subject to the person fulfilling the same criteria as BT Customers qualifying for registration. 2.5.2 BT shall make no separate charge pursuant to this Schedule for access to the IDQ Service where: a) the Call is received at the specialised DQ bureau dealing with Calls from Blind or Disabled Persons to the IDQ Service; and b) the Calling Party is a Blind or Disabled Person. No refunds shall be offered to the Operator in respect of the provision of the IDQ Service to Blind and Disabled Persons. 2.6 If BT makes a material change to the IDQ Service that BT provides to its own Customers, it shall give the Operator 6 months notice of such change. PAGE 72 of 138 215 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- The notice of such change shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3. BT'S OBLIGATIONS 3.1 BT shall provide the IDQ Service at all times. In other aspects it shall provide the same standard and quality of service as BT makes available to BT Customers calling the IDQ Service from that locality. 3.2 Subject to the provisions of this Schedule, BT shall convey Calls for the IDQ Service received from the Operator System to an IDQ Centre. BT shall be under no obligation to convey any Call to the IDQ Service which is a type of Call that BT does not convey to such service for its Customers. 3.3 BT shall use its reasonable endeavours to ensure that 90 per cent. of all Calls (except those for which there were no queue places available in the automatic call distribution system) to the IDQ Service (averaged over a 24 hour period) will be answered within 15 seconds, 7 days per week (with the exception of Christmas Day when the target percentage shall be 70 per cent.). The balance of all such Calls shall be answered by the Operator as soon as reasonably possible after the 15 second period. 3.4 BT shall correct faults which occur in the BT System which affect the provision of the IDQ Service in accordance with BT's normal engineering practices. For the avoidance of doubt, BT does not warrant that the BT System is, or will be, free from faults. 3.5 Procedures for the provision by BT to the Operator of details of Calls to the IDQ Service handled by IDQ Operators shall be as set out in Annex B whereby BT shall pay refunds to the Operator. Refund information shall be included in TIBS Billing Information and Refund Report. 4. THE OPERATOR'S OBLIGATIONS 4.1 Where the Operator conveys a Call to access the IDQ Service it shall hand over Calls to a BT Switch Connection at a BT DMSU in accordance with the Annex A. 4.2 The Operator shall pay to BT for each Call to the IDQ Service the appropriate charge specified from time to time in the Carrier Price List. 4.3 The Operator shall correct faults which occur in the Operator System which affect the provision of the IDQ Service in accordance with the Operator's normal engineering practices. For the avoidance of doubt, the Operator does not warrant that the Operator System is, or will be, free from faults. 5. COMMENCEMENT & TERMINATION PAGE 73 of 138 216 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.1 BT shall provide the IDQ Service as detailed in this Schedule on the later of the following: 5.1.1 a date 3 months after the date this Schedule was incorporated into the Agreement; or 5.1.2 the first Ready for Service Date; or 5.1.3 such other date as the Parties may agree in writing. 5.2 The Operator may terminate access to the IDQ Service provided under this Schedule by giving 3 months written notice to BT. PAGE 74 of 138 217 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 125 EMERGENCY SERVICE (INCLUDING POST CODE ALLOCATION FOR FIXED EMERGENCY CALLS) 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "CONNECT TO NUMBER" the telephone number of an Emergency Organisation applicable to a Zone Code supplied by the Operator to BT for Mobile Emergency Calls; "FIXED EMERGENCY CALL" an Emergency Call where the Calling Party is using an Exchange Line connected to a fixed Network Termination Point which has a telephone number conforming to the UK national numbering scheme and which permits BT to ascertain the location of the Calling Party; "MOBILE EMERGENCY CALL" an Emergency Call where the Calling Party is using terminal apparatus which is mobile and in respect of which, without a Zone Code, BT would be unable to ascertain the approximate location of the Calling Party; "ZONE CODE" a code, agreed between the Parties, for signalling and display to the BT Operator, identifying the location of the radio station conveying a Mobile Emergency Call from an Operator Customer. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the provision by BT to the Operator of a service comprising the conveyance of Emergency Calls and the handing over of such Calls to an Emergency Organisation. This service shall only be available to be accessed by persons having a telephone number conforming to the UK national numbering scheme. PAGE 75 of 138 218 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.2 Where the Operator System does not hand over Mobile Emergency Calls to the BT System the rights and obligations under this Schedule in relation to Mobile Emergency Calls shall not apply. 2.3 The Emergency Service shall be provided in order to assist the Operator to meet the obligation set out in the applicable Condition of the Operator Licence. However, BT shall be under no obligation to provide any Public Emergency Call Service (as defined in Condition 6 of the BT Licence) wider in scope or more onerous than that which BT is obliged to provide to a BT Customer. 2.4 BT's obligation in respect of an Emergency Call is to convey it and hand it over to an Emergency Organisation. 2.5 If BT makes a material change to the Emergency Service that BT provides to its own Customers it shall give the Operator 6 months notice of such change. The notice of such change shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3. EMERGENCY SERVICES PLANNING AND SET UP 3.1 Where the Operator intends to send Fixed Emergency Calls, it shall; 3.1.1 provide details, for each Network Termination Point, of the telephone number, Operator Customer name and installation address, including the post code, 3.1.2 provide such details, in so far as they have not been provided pursuant to Schedule 150, by electronic data interchange in an agreed format which is recorded in the NIS Manual. 3.2 The provisions of paragraph 7.1.1 (10) of Annex A shall not apply. 3.3 The initial Zone Codes and Connect To Numbers advised to BT by the Operator are set out in Appendix 125.1. 3.4 The Operator shall order and BT shall provide the necessary Data Management Amendments for Emergency Calls to be delivered the relevant Emergency Centres pursuant to the provisions set out in Schedule 140. 4. BT'S OBLIGATIONS 4.1 BT shall, upon receipt of information from the Operator regarding new or amended Zone Codes or Connect To Numbers, install that information within the Emergency Centre database and confirm in writing to the Operator the installation of that information. PAGE 76 of 138 219 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.2 Subject to the provisions of this Schedule, BT shall where Emergency Calls are handed over at agreed Points of Connection: 4.2.1 convey Emergency Calls to an OCHC; 4.2.2 provide an onwards connect service to the relevant Emergency Organisation via a BT Operator by means of two-way voice telephony; and 4.2.3 liaise and co-operate with the Operator in resolving any problems that may arise and assist the Emergency Organisations with requests for call-trace in the event of failure of an Emergency Call. 4.3 BT shall convey Emergency Calls at all times and at the same standard and quality of service as BT makes available to BT Customers making Fixed Emergency Calls from within that locality. 4.4 BT shall, based upon the Zone Code and the Connect To Numbers related to that Zone Code contained within the Emergency Centre database, connect a Mobile Emergency Call to the Connect To Number on that database shown for the Emergency Organisation requested by the Operator Customer. 4.5 In the event that BT receives a Mobile Emergency Call with a Zone Code that is not contained in the Emergency Centre database or that Zone Code does not refer to a required Connect To Number, or the Mobile Emergency Call does not contain all the required information, or the information is incorrect or corrupted, BT shall use reasonable endeavours to convey the Call to a telephone number for the appropriate Emergency Organisation. 4.6 BT shall correct faults which occur in the BT System which affect Emergency Calls in accordance with BT's normal engineering practices. For the avoidance of doubt, BT does not warrant that the BT System is, or will be, free from faults. 4.7 The Operations and Maintenance Manual contains procedures for testing the service set out in this Schedule. 4.8 BT shall provide training to BT Operators for the purpose of providing services under this Schedule. 4.9 Where the Operator has reasonably required BT's assistance in replying to enquiries and complaints in respect of Emergency Calls, BT shall investigate and report to the Operator and neither Party shall make a charge. PAGE 77 of 138 220 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5. THE OPERATOR'S OBLIGATIONS 5.1 The Operator shall agree with Emergency Organisations the appropriate local Emergency Organisation departments who shall receive and process Mobile Emergency Calls from Calling Parties conveyed to them by BT. 5.2 The Operator shall allocate to each radio station within the Operator System, which could convey a Mobile Emergency Call, a Zone Code and agree the area covered by each Zone Code with the relevant Emergency Organisations and provide to BT in the format set out in Appendix 125.1, for each Zone Code, at least one and where practicable up to three Connect To Numbers for each applicable Emergency Organisation. 5.3 The Operator shall advise BT in writing of any variation to an existing Zone Code or its associated Connect To Numbers, or any new Zone Code or its Connect To Numbers in the format set out in Appendix 125.1 or such other format as may be agreed between the Parties in writing from time to time. 5.4 Where the Operator delivers an Emergency Call to the BT System it shall do so at an agreed BT Switch Connection at a BT DMSU in accordance with Annex A and conform with the other requirements for Emergency Calls set out in Annex A. Where BT requires that Mobile Emergency Calls be delivered to another or to different BT Switch Connections, BT shall give the Operator at least 6 months notice. The notice shall specify the location of the additional or different BT Switch Connection and the date by which the changes shall be implemented by the Operator. 5.5 The Operator shall not convey to the BT System Emergency Calls before the date agreed pursuant to paragraph 6.1. 5.6 The Operator shall convey to BT all Mobile Emergency Calls in the format 999 II ABCD where: 999 identifies the Call as an Emergency Call; and II is the Code notified to the Operator by BT which identifies the Emergency Call as a Call from an Operator Customer; and ABCD is the relevant Zone Code notified to BT by the Operator pursuant to paragraph 5.2. or such other digits as the Parties may agree in writing from time to time. 5.7 The Operator shall convey to BT all Fixed Emergency Calls with full CLI and shall permit BT to use such CLI to ascertain the appropriate Emergency Organisation. PAGE 78 of 138 221 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.8 The Operator shall convey Fixed Emergency Calls with the last clearing party initiated release protocol set. 5.9 The Operator shall correct faults which occur in the Operator System which affect Emergency Calls in accordance with the Operator's normal engineering practices. For the avoidance of doubt, the Operator does not warrant that the Operator System is, or will be, free from faults. 5.10 The Operator shall handle, process and reply to all enquiries and complaints about Emergency Calls. 5.11 The Operator shall pay BT for the conveyance of each Emergency Call the charge specified from time to time in the Carrier Price List. 5.12 The Operator shall pay to BT for BT Operator Training the sum specified from time to time in the Carrier Price List for each of Fixed Emergency Call service or Mobile Emergency Call service training within 30 calendar days of the date agreed pursuant to paragraph 6.1 following confirmation by BT of completion of the work. 6. COMMENCEMENT & TERMINATION 6.1 The Operator may convey Emergency Calls to BT and BT shall convey those Calls on the later of the following: 6.1.1 a date 6 months after the date this Schedule was incorporated into the Agreement; or 6.1.2 the first Ready for Service Date; or 6.1.3 such other date as the Parties may agree in writing. 6.2 The Operator may terminate access to the Emergency Service provided under this Schedule by giving 3 months written notice to BT. PAGE 79 of 138 222 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 125.1 ZONE CODE AND CONNECT TO NUMBER INFORMATION PROVISION FORM 1. The Operator shall provide to BT information relating to Zone Codes and Connect To Numbers in the following format or as otherwise amended by BT and advised to the Operator in writing from time to time: To: BT Mobile 999 Admin. Centre Fax: 01925 235017 From: (Name) ...................the Operator Fax: .............. Please implement the following changes to your 999 information. Ref. No. ...................... Date of change..............................Time of change..................... Reason for change.............................................................. Information received from Emergency Organisation (date/time) ......./.......... Information sent to Admin. Centre (date/time)......................./..........
- -------------------------------------------------------------------------------------------------------------- Changes Table BT use only - -------------------------------------------------------------------------------------------------------------- Country or Area Emergency Connect To Numbers in Zones Affected EDB+GIFChange Lists Change Authority format (P) (number) (Q) - ----------------- ----------------- -------------------------- ----------------- -------------- -------------- - ----------------- ----------------- -------------------------- ----------------- -------------- -------------- - ----------------- ----------------- -------------------------- ----------------- -------------- -------------- - ----------------- ----------------- -------------------------- ----------------- -------------- -------------- - ----------------- ----------------- -------------------------- ----------------- -------------- -------------- - ----------------- ----------------- -------------------------- ----------------- -------------- -------------- - ----------------- ----------------- -------------------------- ----------------- -------------- -------------- - -------------------------------------------------------------------------------------------------------------- Continued on following sheet (delete if not applicable) - --------------------------------------------------------------------------------------------------------------
Information received by (name/date/time) ........../.........../............ Information sent to (date/time) ........../........................ Information received by { ] Information received by (name/date/time) ........../.........../............ EDB, GIF and/or lists amended by [ ] [ ] PAGE 80 of 138 223 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2. The form described in the immediately preceding paragraph shall include operational guidance notes which shall be as set down below or as amended by BT and advised to the Operator in writing from time to time: REFERENCE NUMBERS These must run consecutively starting from 1. DATE AND TIME OF CHANGE These shall be within the period Monday to Friday, 08.30 - 16.30. 3 Working Days notice of any required change must be given. REASON FOR CHANGE Give brief description only e.g. "New Zone Code". CHANGES TABLE For every change there must be an entry in all of the first four columns. COUNTY OR AREA Give name of county or area involved. EMERGENCY ORGANISATION State whether it is Fire, Police, Ambulance or Coastguard, with the official name of the Emergency Organisation in brackets e.g. "Police (Northern Constabulary)". ZONE AFFECTED Provide in the format 3123. CONNECT TO NUMBERS You must show the number in the format (P) 01987 654321 (Q). The prefix letter must be (P), (S), (A) or (E) for primary, secondary, alternative or evacuation numbers respectively. The suffix letter must be either (Q) for a queuing system or (N) if there is none. If it is a Connect To Number change, only those Connect To Numbers that have changed shall be included. If there is a new Zone Code or the County or Emergency Organisation for a particular Zone Code is changing, then all relevant Connect To Numbers shall be shown. PAGE 81 of 138 224 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 126 RADIOTELEPHONE CALLS 1. DEFINITIONS 1.1 In this Schedule a reference to a paragraph or Appendix, unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D except as shown below: "BT RADIO OFFICER" a BT radio officer who sets up the Radiotelephone Service; "RADIOTELEPHONE CALL" a Call set up by a BT Radio Officer from the Calling Party to the relevant ship using the Radiotelephone Service; "RADIOTELEPHONE REQUEST CALL" a Call handed over by the Operator to BT on such BT Freefone 0800 number as BT shall advise from time to time, whereby the Calling Party requests the BT Radio Officer to set up a Radiotelephone Call; "RADIOTELEPHONE SERVICE" telephone Calls (including related services) transmitted by wireless telegraphy from a BT wireless telegraphy station to a ship. 2. DESCRIPTION OF SERVICE 2.1 Subject to the provision of this Schedule, BT shall convey Radiotelephone Request Calls handed over from the Operator System to a BT Radio Officer. 2.2 Radiotelephone Request Calls shall be included in the Traffic Forecast in accordance with Annex A. 2.3 On receipt of a Radiotelephone Request Call, the BT Radio Officer shall request the Calling Party to provide its telephone number and details of the destination ship. 2.4 The BT Radio Officer shall attempt to contact the relevant ship and, if successful, shall telephone the Calling Party and set up a Radiotelephone Call. PAGE 82 of 138 225 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.5 Radiotelephone Calls shall be available to a Calling Party whose telephone number conforms to the UK national numbering scheme. 2.6 If BT makes a material change to the Radiotelephone Service that BT provides to its own Customers, it shall give the Operator 6 months notice of such change. The notice of such change shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3. ROUTING 3.1 Where the Operator conveys Radiotelephone Request Calls it shall deliver the Calls to a BT Switch Connection at a BT DMSU, in accordance with Annex A, which is as near as reasonably practicable to the geographical location from which the Call originated or at such other BT Switch Connection as may be agreed in writing. 4. SERVICE QUALITY 4.1 BT shall convey Radiotelephone Request Calls handed over from the Operator System and Radiotelephone Calls at the same standard and quality of service as Calls made by BT Customers making such Calls in that locality. 4.2 BT shall correct faults which occur in the BT System which affect the conveyance of Radiotelephone Request Calls and Radiotelephone Calls in accordance with BT's normal engineering practices. For the avoidance of doubt, BT does not warrant that the BT System is, or will be, free from faults. 4.3 The Operator shall correct faults which occur in the Operator System which affect the conveyance of Radiotelephone Request Calls and Radiotelephone Calls in accordance with the Operator's normal engineering practices. For the avoidance of doubt, the Operator does not warrant that the Operator System is, or will be, free from faults. 5. DURATION 5.1 BT may terminate the provision of a Radiotelephone Service to the Operator if BT ceases to provide Radiotelephone Calls for BT Customers. 5.2 The Operator may terminate access to the Radiotelephone Services under this Schedule by giving three months written notice to BT. 6. CHARGING 6.1 The Operator shall pay to BT for each Radiotelephone Call the appropriate charge specified from time to time in the Carrier Price List. There is a PAGE 83 of 138 226 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- minimum charge equivalent to a three minute Radiotelephone Call. For Radiotelephone Calls greater than three minutes, the duration is rounded up to the next whole minute. 6.2 Where the BT Radio Officer telephones the Calling Party pursuant to paragraph 2.4, the Operator shall release BT from any payment to the Operator for such Call. PAGE 84 of 138 227 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 130 CUSTOMER SITED INTERCONNECT 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "2 MBIT/S CSI INTERCONNECT LINK" a portion of an Interconnect Link comprising a 2 Mbit/s Path, an Intrabuilding Link located at the BT Switch Connection, and, as appropriate, a Signalling Link; "2 MBIT/S PATH" the transmission layer (comprising the Multiplexors, LTE and a Line) between the 2.048Mbit/s G703 interfaces of the Multiplexor located at the Operator building (housing the Point of Connection) and the Multiplexor located at the BT Switch Connection; "LINE" the transmission medium between the two LTE's forming part of the 2Mbit/s Path. 2. DESCRIPTION OF SERVICE 2.1 This Schedule applies to the provision of Customer Sited Interconnect ("CSI") by BT, at the Operator's request, by the Operator ordering CSI in units of single 2Mbit/s CSI Interconnect Link. 2.2 Each 2Mbit/s CSI Interconnect Link contains not more than 30 traffic circuits and may, if required, contain a Signalling Link. A 2Mbit/s CSI Interconnect Link is a component of a Traffic Route and a Traffic Stream. 2.3 Unless otherwise agreed, a 2Mbit/s CSI Interconnect Link may convey Traffic Types of both Parties. 3. PROVISION OF SERVICE PAGE 85 of 138 228 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.1 The Operator shall provide at its expense at the Operator building housing the Point of Connection, suitable accommodation for the BT equipment at the agreed Point of Connection. 3.2 Subject to the provisions of this Schedule, BT shall provide the 2Mbit/s Path and the Intrabuilding Link which form part of the Interconnect Link. 3.3 The Operator shall provide BT with access to the BT equipment at the Point of Connection at reasonable times for provision and or maintenance of 2Mbit/s CSI Interconnect Links. If consent is required from a Third Party, the Operator shall procure such consent. BT undertakes not to damage or destroy equipment forming part of the Operator System whilst providing or maintaining 2Mbit/s CSI Interconnect Links. If such damage or destruction does occur then, subject to the provisions of the main body of the Agreement, BT shall pay the reasonable cost of repair or replacement of such equipment, fair wear and tear excepted. 3.4 Subject to BT obtaining all necessary consents, BT shall provide 2Mbit/s Paths by optical fibre. If BT is unable to obtain such consents BT, after notifying the Operator in writing, may: 3.4.1 suspend its obligations under the relevant order until such time as the necessary consents are obtained; and/or 3.4.2 notify the Operator that, subject to the payment of additional charges (if any), BT shall provide (as a temporary or permanent measure) that 2 Mbit/s Path by radio. 3.5 If pursuant to paragraph 3.4.2 the Operator notifies BT that the Operator does not accept provision by the use of radio, BT's obligation to provide that CSI 2Mbit/s Interconnect Link shall be suspended until such time as the necessary consents are obtained. 3.6 If BT notifies the Operator of its intention to suspend its obligation to provide a CSI 2Mbit/s Interconnect Link in accordance with this paragraph:- 3.6.1 BT shall, if practicable, inform the Operator of the date when BT reasonably expects the necessary consents to be available; and 3.6.2 the Operator may notify BT in writing of the cancellation of the order for that CSI 2Mbit/s Interconnect Link without the pre-payment provisions of Annex A being invoked. 3.7 If pursuant to paragraph 3.4.2 the Operator notifies BT that the Operator accepts provision by the use of radio, BT shall so provide the 2Mbit/s Path, provided that all necessary consents are obtained. PAGE 86 of 138 229 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.8 If a 2Mbit/s Path has been provided by radio, BT at its cost, may, at its discretion, provide in substitution a 2Mbit/s Path by optical fibre. 3.9 If the BT equipment at the Point of Connection requires a continuous mains electricity supply and electricity connection points, they shall be supplied, where specified by BT, by the Operator at its expense. Such electricity shall be available at the same level of supply, protection and continuity as that available to the Operator equipment. 3.10 Forecasting, provisioning, routing principles and test procedures are specified in Annex A. 3.11 The Operator shall provide and maintain, at its expense, the portion of the Interconnect Link from the Point of Connection to the Operator Switch Connection. 3.12 The Operator shall be solely responsible for any loss, theft or destruction of, or damage (reasonable wear and tear excepted) to BT equipment in the accommodation housing the agreed Point of Connection, howsoever caused (unless caused by BT or its agents), occurring at any time while such BT equipment is so located. 3.13 BT shall provide and maintain the 2Mbit/s Path to engineering standards, (including diversity) not less than those used by BT to provide its BT 2Mbit/s digital wide band service to BT Customers. 4. SIGNALLING 4.1 When ordering, for the first time, a 2Mbit/s CSI Interconnect Link between a specific BT Switch Connection and a specific Operator Switch Connection the Operator shall order a Signalling Link Set and specify the Route Type(s) required. Where the BT Switch Connection is at a BT ISC and the Operator has an Interconnect Link to another BT ISC, the Parties may agree to a single Signalling Link Set being used to support Interconnect Links to two BT ISCs. 4.2 The Operator shall order an additional Signalling Link Set if the total number of 2Mbit/s CSI Interconnect Links between the same Switch Connections exceed 40 or multiples of 40. 4.3 An order for a Signalling Link Set shall include an order for two 2Mbit/s CSI Interconnect Links. 5. ROUTE TYPES PAGE 87 of 138 230 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.1 Each Traffic Route is provided with a Route Type. Where a Party orders an additional Route Type it shall specify the required Traffic Type. 6. REARRANGEMENTS 6.1 The Operator may request, in accordance with Annex A, the rearrangement of Intrabuilding Links on the Operator's side of the Point of Connection, or, in the building housing the BT Switch Connection. A change necessitating a 2Mbit/s Path being moved from one building to another building is the termination of, and the provision of a new 2Mbit/s CSI Interconnect Link. 7. CHARGES 7.1 Subject to the provisions of this paragraph 7, for each 2Mbit/s CSI Interconnect Link, each Signalling Link Set and Route Type ordered by the Operator, the Operator shall pay to BT the connection and rental charges specified from time to time, in the Carrier Price List. 7.2 An Intrabuilding Link charge applies to each order for a 2Mbit/s CSI Interconnect Link. If an Intrabuilding Link contains a Signalling Link which supports unidirectional traffic the charge for that Intrabuilding Link is included in the Signalling Link Set charge. 7.3 There are two different Signalling Link Set charges in respect of Customer Sited Interconnect, namely, a charge for such a Link conveying unidirectional traffic (including, notwithstanding such Calls being conveyed in the opposite direction, Indirect Access Calls) and a charge for such a Link carrying bothway traffic. 7.4 The Signalling Link Set charge includes one single Route Type. Charges for additional Route Types are payable as specified from time to time in the Carrier Price List. 7.5 Charges for re-arrangements, pursuant to paragraph 6.1, are payable as specified, from time to time, in the Carrier Price List. 7.6 BT shall apply its retail terms and conditions for the provision by BT of ducting required for CSI. The Operator shall pay to BT duct charges specified from time to time in the BT Retail Price List for "Megastream Charges" - "Ancillary Charges". 7.7 The Operator shall pay the relevant connection charges specified from time to time in the Carrier Price List for each provided 2Mbit/s CSI Interconnect Link. PAGE 88 of 138 231 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7.8 Where initial interconnection is provided by means of Customer Sited Interconnect: 7.8.1 Until the sooner of the next Quarter Day after a period of six months from the launch of the Operators initial commercial service utilising Interconnect Links, or nine months after the provision of the first 2Mbit/s CSI Interconnect Link, the Operator shall, unless otherwise agreed in writing, pay rental for 2Mbit/s CSI Interconnect Links in accordance with the following formula: R(p) = R(t) ---- 2 Where: R(p) is the rental payable R(t) is the sum of all 2Mbit/s CSI Interconnect Link rental calculated from the relevant charges specified from time to time in the Carrier Price List. 7.8.2 After the period referred to in the preceding paragraph, or such other date as the Parties may agree in writing, the Operator shall pay rental for 2Mbit/s CSI Interconnect Links in accordance with the following formula: R(p) = R(t) x C(o) ---- C(t) Where: R(p) is the rental payable R(t) is the sum of each and every 2Mbit/s CSI Interconnect Link rental calculated from the relevant charges specified from time to time in the Carrier Price List; and, taken from the relevant Interconnect Usage Reports of the first three months of the period of four months preceding the due rental date: C(o) is the total Call minutes for Calls conveyed from the Operator to BT (but including Indirect Access Calls conveyed to the Operator and such other Call types as may be agreed) C(t) is the total Call minutes between the Parties. 7.8.3 Following the submission of the first bill pursuant to paragraph 7.8.2 the calculation pursuant to that paragraph shall be applied to the preceding period for which the calculation in paragraph 7.8.1 applied, and any over or PAGE 89 of 138 232 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- under payment by Operator shall be rectified by adjustment of the next following invoice for 2Mbit/s CSI Interconnect Links. 7.9 Where interconnection between the Parties exists prior to the provision of Customer Sited Interconnect, the rental for 2Mbit/s CSI Interconnect Links shall be calculated in accordance with the formula set down in paragraph 7.8.2. 7.10 A connection charge payable pursuant to this Schedule shall be that applicable, from time to time, at the time of placement of the order. 7.11 A rental charge payable pursuant to this Schedule shall be the then current rental charge for the relevant rental period or portion thereof, which shall be the due date referred to in paragraph 7.12. 7.12 Connection and rental charges shall be due on the later of: 7.12.1 the date for the commencement of service of that 2 Mbit/s CSI Interconnect Link specified by the Operator in the relevant order, or 7.12.2 the date which is the earlier of the relevant Ready for Service Date or 30 days after the relevant Ready for Test Date. Rental charges shall be payable in accordance with the periodicity specified in the Carrier Price List. 7.13 In addition to the charges specified from time to time in the Carrier Price List, each Party shall, if applicable, make the additional payments specified in Appendix C of Annex A. PAGE 90 of 138 233 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 140 DATA MANAGEMENT AMENDMENTS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT ADMINISTRATIVE ZONE" a separate administrative unit managing a portion of the BT System; "BT CHARGE BAND" for each BT Switch, a group of Call destinations for which the same BT retail charge (as specified in the BT Retail Price List) applies; "DATA MANAGEMENT AMENDMENT" such reconfiguration of the BT System as is necessary for access, routing and charging of Calls. 2. DESCRIPTION OF SERVICE 2.1 This Schedule applies to Data Management Amendments made pursuant to the Operator's request. 2.2 New Numbering Requirements. 2.2.1 The data changes on a BT Switch necessary for BT, using current BT Charge Bands, to set up Traffic Streams for Number Ranges and Access Codes, which changes apply to: (a) a new AFN; (b) a new NNG; (c) discrimination of a single D digit, or DE digit on a new NNG; (d) discrimination of more than one D digit or DE digit on a new NNG; (e) a new Access Code; PAGE 91 of 138 234 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (f) a new Operator Free Phone NNG. 2.3 Traffic Stream Changes On A BT Switch. 2.3.1 The data changes on a BT Switch necessary for BT to alter the destination of an existing Traffic Stream, which changes apply to an: (a) AFN; (b) NNG; (c) NNG with routing discrimination down to one or more D digit combinations; (d) NNG with routing discrimination down to one or more DE digit combinations; (e) Access Code; (f) Operator Free Phone 0800 and an Operator Free Phone NNG. 2.4 Changes To BT Charge Band Allocation. 2.4.1 The data changes on a BT Switch made necessary because of a change at the Operator's request to the payments payable by the Parties under a relevant Schedule, for BT to relocate the Number Ranges from an allocated BT Charge Band to another current BT Charge Band, which changes apply to: (a) NNGs; (b) NNGs with charging discrimination down to one or more D digit combinations; (c) NNGs with charging discrimination down to one or more DE digits combinations. 2.5 Differential D Digit Charging Discrimination. 2.5.1 The data changes on a BT Switch necessary to expand an existing NNG to an NNG with charging discrimination to a maximum of two D digits. 2.6 Other Data Management Amendments. 2.6.1 Subject to the provisions of this Agreement, BT shall install necessary changes (including data changes) for BT to: PAGE 92 of 138 235 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) route Emergency Calls to appropriate Emergency Centres; (b) make such changes at BT Public Call Boxes or BT Temporary Call Boxes (each as defined in Condition 11 of the BT Licence) to enable Operator Free Phone Calls to be made from such Call Boxes; (c) route Calls to Ported Number NTPs as defined in Schedule 04 (Number Portability); (d) route BT No Ring Calls as defined in Schedule 107 (BT No Ring Calls to the BT System (in connection with a Telemetry Service)). 3. QUOTATION FOR SERVICE 3.1 The Operator shall submit to BT a written request for a quotation for Data Management Amendments in relation to services to be provided under a Schedule of this Agreement and with such request provide to BT in writing the information reasonably necessary to enable BT to produce an implementation programme. 3.2 Save for the changes under paragraph 2.6.1(b): 3.2.1 if a quotation is for a type of Data Management Amendment set out in paragraphs 2.2, 2.4 or 2.5 and is for implementation by BT over the whole geographic area covered by the BT System, BT shall provide such quotation not later than 10 Working Days; or 3.2.2 in all other cases, as soon as reasonably practicable, BT shall provide a written quotation and implementation programme both of which shall be provided not later than 20 Working Days; from receipt of the Operator's request for a quotation. 3.3 A quotation shall remain valid for six months from the date of issue of the relevant quotation. 3.4 BT shall compile the quotation on the basis of the minimum cost to the Operator that is consistent with good engineering practice in executing work in the BT System. 3.5 For Data Management Amendments: (a) for changes pursuant to 2.6.1(b) the implementation programme and price shall be subject to the Parties' written agreement; and PAGE 93 of 138 236 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (b) associated with Access Codes, BT may advise the Operator, as soon as reasonably practicable and in any event not later than the time of the provision of the implementation programme, that the implementation programme may be in excess of 40 Working Days; and if the implementation programme is in excess of 40 Working Days the implementation programme shall be subject to the Parties' written agreement. 3.6 If, BT is late in providing a written quotation and implementation programme pursuant to paragraph 3.2 and the Operator immediately places an order for such pursuant to paragraph 4, BT shall complete the implementation programme within the time periods specified in paragraph 4.3 less the number of days that it was late in providing the relevant quotation and implementation programme. 4. ORDER AND IMPLEMENTATION PROCESS 4.1 Not later than six months from the date of a quotation, the Operator may place on BT a written order accepting the quotation. Such order shall specify the required date of completion of the implementation programme, subject to such completion date being: 4.1.1 not less than 40 Working Days from the date of receipt of the order by BT; and 4.1.2 not more than 40 Working Days after the validity period of the relevant quotation. 4.2 As soon as practical and not later than two Working Days from the date of BT's receipt, BT shall give written acknowledgement of receipt of the order. BT shall proceed with the implementation programme for the Data Management Amendment provided that: 4.2.1 the Operator and BT have agreed in writing the Schedule(s) for service(s) or, the service is launched pursuant to paragraph 8 of the main body of the Agreement to which such Data Management Amendment order relates; 4.2.2 the Operator has given written confirmation to BT that the Number Ranges have been reserved and allocated to the Operator by the Director General for use by the Operator or the Operator provides to BT written authority, from the Third Party Operator to whom the Number Range has been allocated, to carry out the requested Data Management Amendment; PAGE 94 of 138 237 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.2.3 the Operator and BT have agreed such Operator test facilities as BT may reasonably require and the Operator has provided such test facilities (including, without limitation, such number of test lines and appropriate tone/announcement) by the time of commencement by BT of the implementation programme;. 4.2.4 the order form has been completed by the Operator; and sufficient Capacity (for testing by BT of the Data Management Amendment) is ready for service or has been ordered by the Operator with a Ready For Service Date being prior to the commencement date of the implementation programme by BT. 4.3 Except for those Data Management Amendments specified in paragraphs 2.6.1(b) and 3.5(b) and subject to paragraphs 4.1, 4.2 and 4.4, BT shall complete the implementation programme for the Data Management Amendments not more than 40 Working Days from the date of receipt by BT of the relevant order, or, if later, the required date for completion specified in the relevant order. 4.4 Completion by BT of the implementation programme is subject to the ongoing availability of sufficient Operator test facilities. 4.5 If the provisions of paragraphs 4.2 and 4.4 are not met, BT may suspend the implementation programme and shall advise the Operator that work shall not recommence until: 4.5.1 the Operator gives written confirmation to BT that the provisions of paragraphs 4.2 and/or 4.4 (as the case may be) have been met; and 4.5.2 the Parties agree any amendments to the implementation programme and revisions (if any) to the Data Management Amendment charges, such agreement not to be unreasonably withheld or delayed; and if work does not recommence within 60 Working Days, the Data Management Amendment order (subject to BT giving not less than 60 Working Days notice) shall be deemed a cancellation by the Operator and the date of suspension by BT shall be the date used to calculate the number of Working Days in calculating the charges payable by the Operator pursuant to paragraph 5.3. 4.6 A revision to the implementation programme in accordance with paragraph 4.5 may result in the implementation period being extended to such period as is greater than 40 Working Days plus the period of delay. PAGE 95 of 138 238 SUBJECT TO CONTRACT - ------------------------------------------------------------------------------- 4.7 On completion of the implementation programme, BT shall give written confirmation to the Operator of full implementation of the Data Management Amendment order. 4.8 A reference in this Schedule to a matter being agreed between Parties means such agreement not to be unreasonably withheld or delayed. If agreement between the Parties is not reached pursuant to paragraphs 3.5 and 4.2 either Party may notify the other in writing of a Dispute. 5. CHARGING 5.1 The quotation for each type of Data Management Amendment requested by the Operator pursuant to paragraph 2 (excluding those in paragraph 2.6.1(b)) shall be set out and calculated as the sum of the charges for the following components: (a) fixed charge; plus (b) zone charge multiplied by the number of affected BT Administrative Zones; plus (c) processor charge for each affected BT Exchange type multiplied by the number of such affected BT Exchanges. The above component charges, for each type of Data Management Amendment, shall be specified from time to time in the Carrier Price List. 5.2 For implementation by BT of a Data Management Amendment order, the Operator shall pay the charges quoted by BT and payment shall be due on the earlier of: 5.2.1 BT giving written confirmation to the Operator of the full implementation of the Data Management Amendment order; or 5.2.2 if the order has been subject to suspension pursuant to paragraph 4.5, the original required date for the completion of the work as specified in the original order. 5.3 If, prior to notification by BT to the Operator pursuant to paragraph 4.7, the Operator (a) requests a material alteration to the implementation programme, or (b) cancels the order, within the time periods set out below, the Operator shall pay to BT the charges set out opposite such time periods, being the charges specified in the relevant quotation for that order: NUMBER OF WORKING DAYS PRIOR TO THE REQUIRED DATE FOR THE COMPLETION OF THE CHARGE PAGE 96 of 138 239 SUBJECT TO CONTRACT - --------------------------------------------------------------------------------
IMPLEMENTATION PROGRAMME --------------------------------------------- --------------------------------- 20 or more fixed charge --------------------------------------------- --------------------------------- --------------------------------------------- --------------------------------- 19 - 10 fixed and zone charges --------------------------------------------- --------------------------------- --------------------------------------------- --------------------------------- 9 - 0 fixed, zone and processor charges --------------------------------------------- ---------------------------------
PAGE 97 of 138 240 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 150 ENTRIES IN BT'S NUMBER INFORMATION SYSTEM (NIS) AND PHONE BOOKS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT DAS DATABASE" the BT database in machine-readable form of names, addresses and telephone numbers used by BT for the purpose of providing, by means of the BT System, a Directory Information Service; "BT NIS DATABASE" the BT database containing information (including without limitation, names, address and telephone numbers) relating to BT Customers and customers of certain Third Party Operators; "BT PHONE BASE" the BT database containing entries from time to time available for the alphabetical section of BT Phone Books; "BT PHONE BOOK" an unclassified printed telephone directory, published by BT, relating to a particular geographical area and containing, in alphabetical order, the names, addresses and telephone numbers of BT Customers and certain customers of Third Party Operators; "BT PHONE DISK" a BT compact disc containing entries from time to time available for the alphabetical section of BT Phone Books; "DIRECTORY INFORMATION SERVICE" a service as defined in Section 4(3) of the Act; "LORS DATABASE" the BT database used to view, add, amend and delete names, addresses and telephone numbers of certain Third Party Operators on the BT NIS Database; PAGE 98 of 138 241 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "NIS INFORMATION" data, being the relevant part of Operator Customer Information included in the BT NIS Database in accordance with Operator instructions and the practice applicable to BT Customers; "OPERATOR CUSTOMER INFORMATION" information provided by the Operator relating to a person having a telephone number allocated in accordance with the UK national numbering scheme. The expression shall also include information relating to the Operator in respect of those telephone numbers which the Operator has allocated for its own use; "OPERATOR EX-DIRECTORY INFORMATION" Operator Customer Information in respect of which the Operator notifies BT in writing that the telephone number is not to be disclosed; "PHONE BOOK INFORMATION" data, being part of Operator Customer Information for inclusion in a BT Phone Book, in accordance with the Operators instructions and with the practice applicable to BT Customers. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the provision by BT to the Operator of services whereby BT includes NIS Information on the BT NIS Database and Phone Book Information in BT Phone Books, BT Phone Base and BT Phone Disk 2.2 If BT wishes to make a material change to the services set out in this Schedule, it shall give the Operator 6 months' notice of such change. The notice of such change shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3. INCLUSION OF OPERATOR CUSTOMER INFORMATION ON BT'S NIS DATABASE 3.1 The Operator shall: 3.1.1 for Operator Customer Information provided by the Operator via the BT OLO Group (OLG): 3.1.1.1 supply to BT forecasts to enable BT to plan to meet its obligations under this Schedule. These forecasts shall include details of the PAGE 99 of 138 242 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- number of new and additional entries, and of amendments and cessations of information previously included on the BT NIS Database. The forecasts shall initially be supplied before the date upon which the Operator wishes the service to commence and be for 2 years broken down quarterly. These forecasts shall be up-dated at least once a year; 3.1.1.2 where the Operator provides Operator Customer Information in written form, deliver the Operator Customer Information to BT in the agreed format recorded in the NIS Manual; 3.1.1.3 where the Operator provides Operator Customer Information on computer disk or by electronic data interchange, give BT two weeks' written notice of the date on which delivery shall commence and deliver the Operator Customer Information in the agreed format recorded in the NIS Manual; 3.1.1.4 deliver collations of Operator Customer Information to BT on a daily or weekly basis as agreed between the Parties and shall use reasonable endeavours to ensure that the Operator Customer Information is accurate and complete and that Operator Ex-Directory Information is clearly marked as such; 3.1.2 when accessing the LORS Database: 3.1.2.1 input Operator Customer Information in accordance with the format recorded in the NIS Manual; 3.1.2.2 access the LORS Database in accordance with the BT LORS Access Guide Issue 1 dated June 1996 as the same may be updated from time to time; 3.1.3 before passing Operator Customer Information to BT, obtain any consents deemed necessary by the Operator or ensure that such consents have been obtained, including those required under the Data Protection Act 1984 so that BT may treat that information in the same way as it treats information regarding BT Customers held in the BT NIS Database; 3.1.4 nominate members of its staff, and telephone numbers to contact such staff, in sufficient numbers as BT may reasonably require as contact points to provide assistance to facilitate the inclusion of Operator Customer Information onto the BT NIS Database; 3.1.5 pay the appropriate charges in respect of Operator Customer Information included on the BT NIS Database as specified from time to time in the Carrier Price List. The holding charge is payable per PAGE 100 of 138 243 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- year, and payment is due on the next Quarter Day following the date of entry of the particular Customer Information into the BT NIS Database and yearly thereafter. For this purpose the Quarter Days are 1 January, 1 April, 1 July and 1 October. This charge is payable each year until deletion of the Customer Information; 3.1.6 The charges for additions and amendments will become due on the next Quarter Day. 3.2 BT shall use reasonable endeavours to include Operator Customer Information on the BT NIS Database within 2 Working Days from receipt of the Operator Customer Information pursuant to paragraph 3.1.1 and within 1 Working Day from entry of the Operator Customer Information onto the LORS Database pursuant to paragraph 3.1.2. BT shall then make the Operator Customer Information available on the BT DAS Database, BT Phone Base and BT Phone Disk in the same timescale as BT makes similar information available relating to BT Customers. 3.3 Where any Operator Customer Information cannot be processed because that information is inaccurate or incomplete, BT will reject that information and inform the Operator within two Working Days. BT shall be under no obligation to enter rejected information on the BT NIS Database. 4. EXCEPTIONAL CIRCUMSTANCES 4.1 Where there is an established base of Operator Customer Information which is to be included in the BT NIS Database pursuant to paragraph 3.1.1, the Parties will agree a timescale for entry of this Operator Customer Information. BT will use reasonable endeavours to meet this timescale and the Operator releases BT from the obligation set out in paragraph 3.2. 4.2 Where the Operator provides more Operator Customer Information than it has forecast pursuant to paragraph 3.1.1.1, BT will use reasonable endeavours to enter this information in BT NIS Database but shall be released from the obligation set out in paragraph 3.2. In this circumstance, BT will invite the Operator to re-forecast further requirements and to indicate the order in which BT should process the Operator Customer Information. 5. BT PHONE BOOKS 5.1 Except where the Operator has asked BT to delete Operator Customer Information, BT shall use reasonable endeavours to include in the next and subsequent editions of the BT Phone Book specified in the Operator Customer Information, Phone Book Information selected from NIS Information included on the BT NIS Database in accordance with paragraph 3.2 (other than that clearly marked by the Operator as Operator Ex-Directory PAGE 101 of 138 244 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Information or as information that is not to be included in BT Phone Books). 5.2 Entries in the BT Phone Books, including additional and special directory entries, will be available in the same styles and formats as are available to BT Customers. 5.3 BT shall not be obliged to produce any special or additional notice or edition of any BT Phone Book in order to perform its obligations under this paragraph 5. Each BT Phone Book will acknowledge, where applicable, that it contains numbers of customers of Third Party Operators other than BT. BT shall not be obliged to correct any error or omission arising in connection with any entry of Operator Customer Information or any other entry in any BT Phone Book. However BT shall endeavour to correct errors or omissions notified to BT by the Operator in subsequent editions of the BT Phone Book. 5.4 The choice of name and format for BT Phone Books shall at all times remain within BT's sole discretion. 5.5 In addition to any other charges set out in the Schedule, the Operator shall pay the appropriate charges for entries in BT Phone Books. The rates to be paid by the Operator for the inclusion of additional entries, and entries using bold or superbold typefaces, for entries relating to Operator Customer Information in BT Phone Books shall be an annual payment per edition of a BT Phone Book in which an entry is to be included, and this will be four times the quarterly rental as published from time to time in the BT Retail Price List for similar entries and will become due on the next Quarter Day and annually thereafter. 6. USE OF OPERATOR CUSTOMER INFORMATION 6.1 BT shall protect and be entitled to use Operator Customer Information in all respects in the same manner as BT Customer information contained in the BT NIS Database. 6.2 At the request of the police only, a BT Operator may ask a person whose telephone number is classified as Operator Ex-Directory Information if the person will accept a Call from the police. 6.3 BT shall be entitled to use, copy, modify, merge, re-sell, licence the use of, transfer or publish all information contained on the BT NIS Database and Phone Book Information (including entries based upon Operator Customer Information other than Operator Ex-Directory Information), which shall include publication by BT of any classified or unclassified directory provided that BT shall not use Operator Customer Information separately PAGE 102 of 138 245 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- from the generality of information on the BT NIS Database or Phone Book Information. 6.4 BT shall be entitled to permit Third Party Operators in the United Kingdom and operators of Authorised Overseas Systems to access the BT DAS Database or the information contained therein for the purpose of providing Directory Information Services or telephone number information, respectively. 7. COMMENCEMENT AND TERMINATION 7.1 BT shall provide service under this Schedule on and from the later of: 7.1.1 a date one month after the date this Schedule was incorporated into the Agreement; or 7.1.2 such other date as the Parties may agree in writing. 7.2 The Operator may terminate the services provided under this Schedule by giving 3 months' written notice to BT. 7.3 BT may terminate the services provided under this Schedule by giving 6 months' written notice to the Operator. PAGE 103 of 138 246 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 152 SUPPLY OF BT PHONE BOOKS 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT PHONE BOOK" one of BT's unclassified printed telephone directories relating to a particular geographical area and containing, in alphabetical order, the names, addresses and telephone numbers of BT Customers and customers of Third Party Operators. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the supply of paperback versions of BT Phone Books to the Operator. In this Schedule, the London-wide Residential Phone Book shall count as two BT Phone Books for charging and delivery purposes. 3. SUPPLY OF BT PHONE BOOKS AT ANY TIME 3.1 BT shall supply BT Phone Books to the Operator following receipt of a written order in the agreed format recorded in the Phone Books Manual. The BT Phone Books shall be delivered to a single address within the United Kingdom specified by the Operator. 3.2 The charge for supply of BT Phone Books as provided for in paragraph 3.1 will be the price specified from time to time in the Carrier Price List and where applicable, be subject to the discounts set out therein where the BT Phone Books are delivered together against a single order to a single address. BT shall invoice the Operator following delivery of the BT Phone Books. 4. SUPPLY OF BT PHONE BOOKS AT A SCHEDULED PRINT DATE 4.1 BT shall provide to the Operator at approximately quarterly intervals, a list of the dates on which production of new or reprinted BT Phone Books will be completed during the subsequent twelve months. Where the Operator provides to BT a written order for more than 1000 of the same edition of BT PAGE 104 of 138 247 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Phone Books in the agreed format at least three months before the dates on which production of new or reprinted BT Phone Books will be completed, BT shall: 4.1.1 accept the order subject to payment of a order charge specified from time to time in the Carrier Price List; 4.1.2 give the Operator the option of having the BT Phone Book put into a coloured wrapper without any of the loose inserts which BT would have packed with the BT Phone Book; 4.1.3 deliver the BT Phone Books to the Operator at a single address in the United Kingdom subject to the Operator's agreement to pay the Delivery Charges specified from time to time in the Carrier Price List. Where the order is for more than 10,000 BT Phone Books, BT shall provide a quotation for delivery upon request; 4.1.4 permit the Operator to collect the ordered BT Phone Books from BT's printing contractor subject to the Operator collecting the BT Phone Books on the day following the day when production is completed. In the event that the Operator fails to so collect the BT Phone Books, BT shall be entitled to charge the Operator reasonable sums for the removal and storage of the BT Phone Books. 4.2 If the Operator does not exercise the options set out in paragraph 4.1.2 to 4.1.4 and orders in excess of 1000 BT Phone Books for delivery, BT shall, at the Operator's request, arrange for the delivery of the BT Phone Books to those persons specified by the Operator, providing that the BT Phone Book concerned is one that BT distributes automatically to BT Customers in the same geographical area. The Operator shall: 4.2.1 provide an estimate of the number of addresses for which delivery is required, at least three months before the completion of the production of the BT Phone Books; 4.2.2 provide details of the names, full postal addresses, including postcodes and number of BT Phone Books to be delivered for each delivery address at least six weeks before completion of production (except for delivery of the London Business and Services Phone Book where details shall be provided to BT ten weeks before the completion of production). The details shall be supplied in the agreed written format or the agreed format on computer disk which is recorded in the Phone Books Manual. 4.3 BT shall procure that its delivery contractor provides the same delivery service to those persons specified by the Operator as it provides to BT Customers in that locality. PAGE 105 of 138 248 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.4 Where the Operator has ordered more BT Phone Books than are required for delivery the Operator will provide an address in the United Kingdom for delivery of the balance of BT Phone Books. Where this address is in the delivery area for the BT Phone Books that are to be delivered on the Operator's behalf, then BT shall arrange for the delivery of the balance to be free of any additional delivery charge. Where the address is outside the delivery areas the Operator shall pay BT's reasonable delivery charge or collect the books from BT's printing contractor the day following completion of production. 4.5 Where the Operator has ordered less BT Phone Books than are required for delivery, BT shall make up the balance and will invoice the Operator for the balance at the price specified from time to time in the BT Retail Price List. 4.6 Where BT either fails to deliver a BT Phone Book in accordance with the instructions provided pursuant to paragraph 4.2.2 or delivers it in a damaged condition, BT shall arrange for that person to receive the BT Phone Books. However, BT shall only respond to enquiries relating to failure to deliver, the condition of BT Phone Books or the place where the BT Phone Book is left by BT's delivery contractor. 4.7 Where BT is to deliver BT Phone Books to addresses supplied by the Operator, the Operator shall provide a representative sample of 5% of each the residential addresses and the business addresses. This sample shall be used only for BT or its agents to check that BT delivery contractor has satisfactorily completed its tasks. For each address in the sample the Operator shall provide the name, address and telephone number in an agreed format which is recorded in the Phone Book Manual. 5. COMMENCEMENT, DURATION AND REVIEW 5.1 The Operator may place orders for BT Phone Books in accordance with the provisions of this Schedule on and from the date this Schedule was incorporated into the Agreement. However the notice periods set out in paragraph 4 above shall apply. 5.2 BT shall only be obliged to deliver the BT Phone Book to persons nominated by the Operator pursuant to paragraph 4.2 above until 31 May 1997. 5.3 If BT wishes to make a material change to the services set out in this Schedule or to cease delivery of BT Phone Books in accordance with this Schedule, it shall give the Operator 6 months written notice. The notice of such changes shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. PAGE 106 of 138 249 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 6. CHARGING 6.1 The Operator shall pay BT the sums specified from time to time in the Carrier Price List for the supply of BT Phone Books. PAGE 107 of 138 250 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 153 SUPPLY OF CUSTOMISED TELEPHONE DIRECTORIES 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "BT PHONE BOOK" one of BT's unclassified printed telephone directories relating to a particular geographical area and containing, in alphabetical order, the names, addresses and telephone numbers of BT Customers and customers of Third Party Operators; "CUSTOMISED TELEPHONE DIRECTORY" a printed telephone directory conforming to the conditions set out in this Schedule and containing a Preface and the alphabetical section of a BT Phone Book listing names, addresses and telephone numbers; "PREFACE" the first 32 or 64 page section of a Customised Telephone Directory which precedes the alphabetical section; "PRINT COMPLETION DATE" the date on which BT's printing contractor plans to complete the printing of an edition of a BT Phone Book and any Customised Telephone Directories; "PRINT PROOF" a print of a page suitable for checking the accuracy, colour and printing quality; "COPY" art work suitable for the manufacture of printing plates, conforming to the specification set out in Appendix 153.1. 2. DESCRIPTION OF SERVICE 2.1 This Schedule describes the provision by BT of Customised Telephone Directories to the Operator. PAGE 108 of 138 251 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3. ORDERING 3.1 BT shall provide to the Operator, at approximately quarterly intervals, a list of the known Print Completion Dates for new or reprinted BT Phone Books. 3.2 The Operator shall order Customised Telephone Directories by completing the order form set out in the Phone Books Manual such that it is received by BT not less than 4 calendar months before the Print Completion Date for the relevant edition of the BT Phone Book. 3.3 The minimum quantity per order for each edition of a Customised Telephone Directory is 5000. 3.4 If the Operator requires BT to deliver the Customised Telephone Directories it shall specify the delivery address in the order placed pursuant to paragraph 3.2. 4. COMPOSITION OF CUSTOMISED TELEPHONE DIRECTORIES 4.1 The cover and Preface shall conform to the Customised Telephone Directories Specification at Appendix 153.1. 5. NOTICES AND COPYRIGHT 5.1 The Operator shall include in a Customised Telephone Directory the notices set out in Appendix 153.2. 5.2 The Operator hereby indemnifies BT against any and all claims for infringement of any Intellectual Property Right of a Third Party in respect of material provided by the Operator to BT for inclusion in a Customised Telephone Directory. 5.3 BT hereby indemnifies the Operator against any and all claims for infringement of any Intellectual Property Right of a Third Party in respect of the alphabetical section of the Customised Telephone Directory except in so far as such information has been provided by the Operator. 6. PRODUCTION OF CUSTOMISED TELEPHONE DIRECTORIES 6.1 The Operator will supply to BT the Copy for all parts of the Customised Telephone Directories (except the alphabetical section) not less than 40 Working Days before the relevant Print Completion Date. 6.2 30 Working Days before the relevant Print Completion Date, BT shall provide to the Operator copies of Print Proofs of the cover of the Customised Telephone Directories. The Operator shall: PAGE 109 of 138 252 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- a) approve the quality and accuracy of the Print Proof and notify BT in writing; or b) notify BT in writing of those aspects of the quality or accuracy of the Print Proof that are not acceptable; not more than two Working Days from receipt of the Print Proof by the Operator. BT will use its reasonable endeavours to correct those aspects of the Print Proof to which the Operator objects. If practicable BT shall change the Print Proofs and resubmit Print Proofs for further approval by the Operator. If the Operator accepts the quality and accuracy of these resubmitted Print Proofs, the Operator shall indicate its approval in writing to BT within one Working Day of receipt of such resubmitted Print Proof. If the Operator rejects the resubmitted Print Proofs (or fails to notify BT of its acceptance of the Print Proofs within the periods specified above) the order for such Customised Telephone Directories will be deemed to be cancelled. Approval shall be indicated by completion of the relevant form set out in the Phone Book Manual to BT. 6.3 Customised Telephone Directories shall be placed on pallets which, when loaded, shall each be wrapped in stretch film. 7. DELIVERY OR COLLECTION OF CUSTOMISED TELEPHONE DIRECTORIES 7.1 Unless the Operator has requested delivery by BT, the Operator shall collect the Customised Telephone Directories from the address specified by BT within one Working Day of the Print Completion Date or such later date as may be specified by BT. 7.2 Subject to an order being placed in accordance with paragraph 3.2, BT will deliver Customised Telephone Directories to a single address in the United Kingdom. 8. COMMENCEMENT, DURATION AND REVIEW 8.1 BT shall accept orders for Customised Telephone Directories from the date this Schedule was incorporated into the Agreement. 8.2 BT shall not be obliged to provide Customised Telephone Directories pursuant to this Schedule after 30th September 1998. 8.3 Where the Operator has previously ordered and BT intends to cease provision of Customised Telephone Directories, BT shall send a notice to the Operator on or before 31 March 1998 stating such intention. PAGE 110 of 138 253 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 9. CHARGING 9.1 The Operator will pay to BT the charges specified from time to time in the Carrier Price List for the supply of Customised Telephone Directories. 9.2 If an order is cancelled by the Operator or deemed to be cancelled, the Operator shall pay to BT the cancellation fee specified from time to time in the Carrier Price List. PAGE 111 of 138 254 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 153.1 SPECIFICATION FOR THE COVERS AND PREFACES OF CUSTOMISED TELEPHONE DIRECTORIES 1. COVER The cover will be 4 pages only plus spine (outside front - page 1, inside front - page 2, inside back - page 3, outside back plus spine - page 4 produced by the Offset Litho process. Maximum finished size: 210mm wide x 297mm deep Maximum Image Areas: a) No Bleed 204mm wide x 291 mm deep b) With Bleed 216mm wide x 303 mm deep Maximum screen value for Halftone reproduction: Cover pages 1 and 4 = 150# Cover pages 2 and 3 = 120# The Operator shall supply cover origination material as follows: Cover pages 1 & 4 - same size film positives, separated for standard 4 colour process printing (Yellow, Cyan, Magenta and Black), film must be adjustable for spine wide. Cover pages 2 & 3 - same size film positives, separated for standard 4 colour process printing (Yellow, Cyan, Magenta and Black) for each page. Film shall be supplied with the image "right" reading (not reversed) and emulsion side down. All colour separated film shall be supplied with a full set of colour progressive proofs for colour matching on BT printer's printing press. The Preface shall be paginated and printed as follows: a) 32 page section printed in "Black" ink only b) 32 page section printed in "2 colours" (black and cyan) as BT preface c) 64 page section printed in "Black" ink only d) 64 page section printed in "2 colours" (black and cyan) as BT preface The maximum acceptable image area for each page is: a) 190mm wide x 282 mm deep (image centred on finished page size) Maximum screen value for Halftone reproduction: 100# PAGE 112 of 138 255 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Maximum tint value for second colour underlay: 25% Note: Text pages cannot be bled to the head or tail of the book, for edge bleed can be accepted, if required, the bleed image area must be extended to 216mm wide. 6mm is trimmed off the spine as part of the binding process. The Operator shall supply Customised preface origination material as follows: same size film positives, separated for 2 colour printing if required. Final film shall be supplied with the image "right" reading (not reversed) with the emulsion side down. PAGE 113 of 138 256 APPENDIX 153.2 NOTICES 1. The front cover of each Customised Telephone Directory shall be dated with the month and year of production. 2. The front cover shall have a notice to the effect that the Customised Telephone Directory contains telephone numbers of BT Customers and those of certain other licensed telephone operators. 3. The Preface shall contain the following notices: (a) COMPILATION. British Telecommunication plc compiles the alphabetical section of this Directory. Every care is taken to render the section as accurate as possible, but British Telecommunications plc cannot accept any responsibility for loss or damage which may arise or result from errors or omissions. The contents of the alphabetical section relate to the latest information available to British Telecommunications plc at the time of going to print which may have altered before this copy of the Directory is issued or may be altered subsequently, without amendment to the alphabetical section. Any information which may assist in maintaining the accuracy of entries in future editions of this Directory will be appreciated and should be sent to (Operator Contact point). In no circumstances will British Telecommunications plc be liable in respect of any error or omission from the alphabetical section of this Directory. (b) COPYRIGHT Alphabetical section (C) British Telecommunications plc Copyright reserved 1. No reproduction of the alphabetical section of the Directory, in whole or in part, is allowed without prior permission in writing to British Telecommunications plc. 2. The alphabetical section of this Directory, in whole or in part, may not be stored in a retrieval system of any kind without prior permission in writing of British Telecommunications plc. 3. Attention is directed to Section 107 of the Copyright, Designs and Patents Act 1988 which make it a criminal offence to perform, without authorisation certain acts in relation to copyright material. PAGE 114 of 138 257 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4. British Telecommunications plc may take legal action against any person responsible for the unauthorised reproduction or storage in a retrieval system of the alphabetical section of this Directory. PAGE 115 of 138 258 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 154 LICENCE TO USE THE BT NIS DATABASE 1. DEFINITION 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "AMENDMENT INFORMATION" information supplied or to be supplied by BT to the Operator for the Operator to update the Licensed Database by changing, adding or deleting Entries; "BT NIS DATABASE" the BT database of information (including, names, addresses and telephone numbers) of BT Customers and customers of certain Third Party Operators; "BUSINESS CUSTOMER" a Customer recorded in a business category on the BT NIS Database; "DESIGNATED AREA" BT local exchange areas agreed between the Parties; "DIRECTORY INFORMATION SERVICE" a service as defined in Section 4 (3) of the Act; "DQR" a classification applied to an Entry indicating that the Entry may not be published in directories; "ENTRY" the collection of data fields on the Licensed Database, including fields for the name, address and telephone number of a Business Customer or Residential Customer, and any privacy classification requested by the customer; "EX-DIRECTORY INFORMATION" information on the Licensed Database in respect of which the telephone number is not to be disclosed; PAGE 116 of 138 259 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "LICENSED DATABASE" the computerised list (including Amendment Information), which BT supplies to the Operator comprising a copy of each Entry having a recorded address in the Designated Area; "RESIDENTIAL CUSTOMERS" a Customer recorded in a residential category on the BT NIS Database. 2. DESCRIPTION OF SERVICE 2.1 The supply by BT to the Operator of a copy of the Licensed Database including where applicable Amendment Information together with a licence granted by BT to the Operator to use the Licensed Database to publish and distribute the Operator's own printed telephone directories and to provide Directory Information Services. 3. DELIVERY OF LICENSED DATABASE 3.1 BT shall: 3.1.1 following receipt of the Operator's written request deliver to the Operator over a period of no more than thirteen weeks a series of data files for a Designated Area in a format advised to the Operator by BT. The data fields delivered over the period shall form a complete copy of the Licensed Database for the Designated Area. 3.1.2 during the delivery period referred to in paragraph 3.1.1 and during the remainder of the Agreement, supply to the Operator, for the Designated Area, Amendment Information at a frequency agreed between the Parties. 4. LICENCE GRANT 4.1 BT grants to the Operator non-exclusive, non-transferable licences to use the Licensed Database for the purposes of: 4.1.1 compiling, publishing and distributing printed telephone directories subject to the printed telephone directories: (a) not including Entries which are ex-Directory Information; (b) having entries ordered alphabetically by name in a classified or unclassified format; (c) containing not less than the name, address and telephone number of persons; and PAGE 117 of 138 260 (d) containing all Entries applicable to a particular geographic area. 4.1.2 providing a Directory Information Service; 4.1.3 providing batch list matching telephone directory enquiry services which shall comprise telephone numbers (including at the Operator's option the area codes and/or exchange names) provided always that the enquirer has supplied in list form on paper, computer disc, or tape, the name and approximate address of the person whose telephone number is sought. 4.2 The Operator may make not more than three (3) copies of the Licensed Database and Amendment Information for the purposes of system security, archive and back-up. 5. OPERATOR UNDERTAKINGS 5.1 The Operator shall: 5.1.1 except where providing the services permitted under this Schedule treat the Licensed Database and Amendment Information as Confidential Information; 5.1.2 treat Entries marked as Ex-Directory Information as Confidential Information; 5.1.3 use Entries marked as DQR only for the purposes of providing the Directory Information Service; 5.1.4 ensure that all printed telephone directories and the Directory Information Services are based on up to date and complete Licensed Database and/or Amendment Information; 5.1.5 mark each printed telephone directory with the date of its publication. 5.2 The Operator shall not: 5.2.1 use the Licensed Database or any Confidential Information for any marketing purposes; 5.2.2 use or permit the use of the Licensed Database or any Confidential Information for the generation of marketing aids (for example lists of any Customers ordered by address, by telephone number, or by date of Entry amendment or addition to the Licensed Database, whether for use in a mailing or otherwise); PAGE 118 of 138 261 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 5.2.3 without prior written consent, alter or change any copyright or acknowledgement or confidentiality marking incorporated in or applied to information, or documentation supplied by BT to the Operator which relates to the Licensed Database or Amendment Information. 6. ERROR HANDLING 6.1 If the Operator is made aware of any material errors or omissions in the Licensed Database the Operator shall notify BT without delay of the errors, at the following address: The Operator Services Information Systems Manager BT Operator Services 3rd Floor Leeds Computer Centre Dewsbury Road LEEDS LS11 5UQ or to such other address as BT may notify to the Operator. 6.2 If BT receives a complaint which relates to or results from the Operator's use of the Licensed Database, then, upon BT's request, the Operator shall assist in BT's investigation of the complaint and take such steps as are reasonably necessary to remedy the complaint as soon as reasonably practicable. 7. MARKING 7.1 The Operator shall ensure that printed directories shall be marked with the following legend: "Produced under licence from and containing copyright material of British Telecommunications plc". 8. COMMENCEMENT 8.1 BT shall provide the services set out in this Schedule from the date this Schedule was incorporated into the Agreement. 9. CHARGING 9.1 The Operator shall pay to BT the charges specified from time to time in the Carrier Price List for the supply and use of the Licensed Database and the Amendment Information. PAGE 119 of 138 262 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 9.2 If the Operator chooses a Designated Area containing less than all BT's local exchange areas, the set up charge and annual payment shall be reduced by the proportion the number of entries has to the total in all BT local exchange areas subject to the minimum charge of 2-1/2% of the prices specified from time to time in the Carrier Price List. PAGE 120 of 138 263 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- BT STANDARD INTERCONNECT AGREEMENT SCHEDULE 155 ACCESS TO THE BT DIRECTORY ASSISTANCE SYSTEM DATABASE USING OPERATOR SERVICES CUSTOMER ACCESS AND SECURITY SYSTEM (OSCASS) 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix, unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meanings given in Annex D, except as shown below: "APPLICATION PROGRAM" the software used to interpret the Dynamic Link Library so that information can be displayed on Computer Terminal Equipment; "BT DAS" a BT computer system used by BT to access a BT DAS Database, and sometimes known as the Directory Access System; "BT DAS COMPUTER CENTRE" a computer centre containing a BT DAS; "BT DAS DATABASE" a BT database in machine readable form of names, addresses and telephone numbers used by BT for the purpose of providing, by means of the BT System, a Directory Information Service; "BT DAS OPERATOR TRAINING PACKAGE" the training package provided by BT to the Operator to enable Operator DAS Operators to access the BT DAS Database and retrieve appropriate information in accordance with this Schedule; "BT OSCASS" a BT platform which permits access to a BT DAS by Operator DAS Operators; "COMPUTER TERMINAL EQUIPMENT" computer equipment using a 486 or faster processor with at least 8Mbyte of RAM used by Operator DAS Operators on line to the BT DAS Database as the PAGE 121 of 138 264 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- man/machine interface to access information on the BT DAS Database; "DIRECTORY INFORMATION SERVICE" a service defined in Section 4 (3) of the Act; "DYNAMIC LINK LIBRARY" the functions and syntax of instructions understood by BT DAS; "EX-DIRECTORY INFORMATION" information on the BT DAS Database which is marked to indicate that it is not to be disclosed; "OPERATOR CUSTOMER INFORMATION" information provided by the Operator relating to a person having a telephone number allocated in accordance with the United Kingdom national telephone numbering scheme. The expression shall also include information relating to the Operator in respect of those telephone numbers which the Operator has allocated for its own use; "OPERATOR DAS OPERATOR" a telephony operator who is directly employed by or under the control of the Operator and situated in the United Kingdom and who is authorised by the Operator to access a BT DAS Database for the purpose of providing a Directory Information Service; "OSCASS PORT" a port on the BT OSCASS which gives access to a BT DAS by a single Operator DAS Operator at any one time; "PUBLIC FRAME RELAY SERVICE" a user-to-network interface for fast packet switching. 2. DESCRIPTION OF SERVICE 2.1 This Schedule gives details of the provision by BT to the Operator of access to the BT DAS Database via BT OSCASS accessed by means of the Public Frame Relay Service or private circuits provided by BT. PAGE 122 of 138 265 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3. BT'S OBLIGATIONS 3.1 BT shall permit Operator DAS Operators, on a non exclusive basis, to have remote on-line access to the BT DAS Database via BT OSCASS by means of OSCASS Ports at an agreed level of capacity, Computer Terminal Equipment and interfaces of the type specified in this Schedule and the Public Frame Relay Service or private circuits provided by BT, linking such Computer Terminal Equipment and the agreed BT DAS Computer Centre for the sole purpose of the Operator providing a Directory Information Service and for other ancillary purposes expressly permitted by this Schedule. 3.2 BT shall provide such private circuits or Public Frame Relay Service connections as are ordered by the Operator to access the BT DAS Database in accordance with BT's Standard Conditions for Private Service or BT's Data Network Portfolio Conditions respectively at the retail tariff published from time to time in the BT Retail Price List. 3.3 BT gives no warranty that the data on the BT DAS Database will be free from errors or inaccuracies. 3.4 The BT DAS Database provided for access by the Operator in accordance with this Schedule will be available at all times except for the periods when the data is being updated. 3.5 If BT wishes to make a material change to the services set out in this Schedule, it shall give the Operator 6 months' written notice. The notice of such changes shall be a review notice in accordance with paragraph 19.1.3 of the main body of this Agreement. 3.6 BT shall provide the Operator with a written specification of the Dynamic Link Library and any amendments from time to time 4. THE OPERATOR'S OBLIGATIONS. 4.1 The Operator shall be responsible at its own expense for the acquisition and maintenance of the Computer Terminal Equipment. 4.2 The Operator shall be responsible at its own expense for the acquisition of any licence or licences required to use the software associated with access to the BT DAS Database and for the operation of the Computer Terminal Equipment. 4.3 The Operator shall be responsible at its own expense for the acquisition and maintenance of any Application Program used to read the information supplied by the BT DAS Database in a form consistent with the Dynamic Link Library. PAGE 123 of 138 266 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.4 The Operator shall conform with the Dynamic Link Library and use interfaces specified in Appendix 155.1 to this Schedule or such other interfaces as BT may specify in writing from time to time. 4.5 Before the commencement of service under this Schedule, the Operator shall agree with BT in writing the number of OSCASS Ports allocated to the Operator connected to and capable of being used to access the BT DAS Database. The Operator shall provide not less than 6 months' written notice of any request to increase or decrease the number of OSCASS Ports. 4.6 The Operator shall ensure that any Operator DAS Operator only has access to the BT DAS Database when that Operator DAS Operator is connected to a Calling Party by means of voice telephony, except where Computer Terminal Equipment is being used for the purposes of training of Operator DAS Operators to access the BT DAS Database, inspecting Operator Customer Information or the Operator DAS Operator is responding to a series of enquiries and is to provide that information to the Calling Party at a later time. 4.7 The Operator may access the BT DAS Database to provide a Directory Information Service, to provide training to Operator DAS Operators, or for the purpose of inspecting Operator Customer Information held on the BT DAS Database and for no other purpose. 4.8 The Operator shall access the BT DAS Database in accordance with the BT DAS Operator Training Package as amended by BT from time to time. 4.9 The Operator shall not disclose to any Third Party information which is Ex-Directory Information, other than the fact that a number is so classified, and shall ensure that Ex-Directory Information cannot be viewed or otherwise retrieved from the BT DAS Database. 4.10 The Operator shall ensure that access to the BT DAS Database is in read-only format except that the Operator may use any printer which forms part of the Computer Terminal Equipment, to the extent necessary for the purpose of notifying BT of errors in the BT DAS Database. 4.11 The Operator shall comply with the fault and error reporting procedures BT may specify in writing from time to time. 4.12 The Operator shall not, except as provided for under this Schedule, reproduce or transmit any part of the BT DAS Database in any form, by any means, whether electronic, mechanical, photocopying, recording or otherwise, nor store the same in any information retrieval system of any kind. PAGE 124 of 138 267 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 4.13 Whilst having access to the BT DAS Database, the Operator shall not knowingly do or permit to be done anything which will result in: 4.13.1 damage to a BT DAS Computer Centre; or 4.13.2 modification or damage to the BT DAS Database; or 4.13.3 modification or damage to a BT DAS. 4.14 The Operator shall make only such copies of the BT DAS Operator Training Package as are necessary for training Operator DAS Operators and not to disclose the contents to any person not employed by the Operator. 4.15 The Operator shall use and connect the Computer Terminal Equipment only in accordance with BT's relevant written instructions provided from time to time. These written instructions shall be consistent with those that BT provides to its own staff. 4.16 The Operator shall be responsible for ordering from BT any necessary access to the Public Frame Relay Service or private circuits required. 4.17 The Operator shall pay the access fee for OSCASS Ports at the rate specified from time to time in the Carrier Price List. 4.18 The Operator shall agree the Operator DAS Operator system security policy and practice with BT in writing prior to commencement of service under this Schedule and shall not change such without the prior agreement of BT in writing. 5. TESTING 5.1 BT shall have the right to require testing of the Operator's access system to confirm correct interworking. This may comprise testing of the Operator's: 5.1.1 access network and 5.1.2 Application Program. 5.2 Not later than 30 working days after receipt of a written request from the Operator, BT shall provide an initial indication of the level of testing required, having been given details of the Operator's access network arrangements and Application Program. BT and the Operator shall then agree exact test requirements and timescales. 6. COMMENCEMENT AND DURATION. PAGE 125 of 138 268 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 6.1 BT shall provide service under this Schedule on and from the later of the date this Schedule was incorporated into the Agreement, the contractual delivery date for the private circuit or Public Frame-Relay Service connection referred to in paragraph 4.16, or such other date as the Parties may agree in writing. 6.2 BT may terminate the provision of service under this Schedule by giving 12 months' written notice to the Operator. 6.3 The Operator may terminate access to the service provided under this Schedule by giving 6 months' written notice to BT. PAGE 126 of 138 269 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- APPENDIX 155.1 INTERFACES The interfaces are as follows. 1. Access via the BT Public Frame Relay Service Protocol: TCP/IP (IP over RFC 1294 Frame relay encapsulation) Committed Information Rate: Default of 16k bps but will depend on usage. 2. Access via a KiloStream Circuit Protocol: TCP/IP (IP over Cisco HDLC if Operator uses a Cisco Router or IP over Point to Point Protocol (PPP) for other makes of router). Line Speed: 64k bps Physical Interface: X21 PAGE 127 of 138 270 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 541 OPERATOR TELEPHONY CALLS TO THE OPERATOR SYSTEM 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "ADC CALL CATEGORY (TRANSFER one of Local ADC (Transfer Charge Calls) or CHARGE CALLS)" National ADC (Transfer Charge Calls), as appropriate; "LOCAL ADC (TRANSFER CHARGE CALLS)" the contributions towards BT's Access Deficit that apply to Transfer Charge Calls where, if Calls were conveyed wholly within the BT System between the same originating and terminating points (Calls made or received on mobile terminal apparatus shall for this purpose be treated as originating or terminating at the relevant wireless telegraphy station carrying the Call), such Calls would be classified as local calls in the BT Retail Price List; "NATIONAL ADC (TRANSFER the contributions towards BT's Access CHARGE CALLS)" Deficit that apply to Transfer Charge Calls where, if Calls were conveyed wholly within the BT System between the same originating and terminating points (Calls made or received on mobile terminal apparatus shall for this purpose be treated as originating or terminating at the relevant wireless telegraphy station carrying the Call), such Calls would be classified as national calls in the BT Retail Price List; "OPERATOR SEGMENT CALL" an Operator Telephony Call handed over from the BT System to the Operator System, switched by one or more Operator Exchanges, to an Operator Network Termination Point. PAGE 128 of 138 271 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2. DESCRIPTION OF SERVICE 2.1 Subject to the provisions of this Schedule, the Operator shall convey Operator Telephony Calls handed over from the BT System to the appropriate Operator Network Termination Point. 2.2 Operator International Incoming Calls, Operator Transit Calls, Operator BT to BT Transit Calls and Calls to Ancillary Services are not conveyed pursuant to this Schedule. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 The Operator's obligation to convey Operator ISDN Telephony Calls is subject to the respective Systems and all relevant Switch Connections of both Parties being suitable for the conveyance of Operator ISDN Telephony Calls. 2.5 The Operator shall not be obliged under this Schedule to make its System suitable for the conveyance of Operator ISDN Telephony Calls or to provide equipment to its Customers enabling Operator ISDN Telephony Calls. 2.6 The Operator shall convey Operator Telephony Calls during those periods of time and at the same standard and quality of service as the Operator conveys similar Calls. 2.7 Each Party shall correct faults which occur in its System which affect the conveyance of Operator Telephony Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 3. ROUTING 3.1 The conveyance of Operator Telephony Calls shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 For the conveyance of each Operator Telephony Call by the Operator, BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. 4.2 For the conveyance of each Operator Telephony Call by the Operator, which is also a Transfer Charge Call, the Operator shall pay BT a charge calculated in accordance with the rate for such a Call specified from time to time in the PAGE 129 of 138 272 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Carrier Price List, and BT shall pay no charge to the Operator pursuant to the preceding paragraph 4.1. 4.3 For the conveyance of each Operator Telephony Call by the Operator, which is also a Transfer Charge Call, made by a Calling Party from a BT Public Call Box or a BT Temporary Call Box (each as defined in Condition 11 of the BT Licence), the Operator shall pay BT for each such Call, in addition to any other charges, the BT Payphone Access Levy specified from time to time in the Carrier Price List. 5. CONTRIBUTIONS TO BT'S ACCESS DEFICIT 5.1 Subject to the provisions of this paragraph 5, the Operator shall pay for each Operator Telephony Call which is also a Transfer Charge Call, a contribution to BT's Access Deficit at the rate specified for the ADC Call Category (Transfer Charge Calls) specified in the Carrier Price List from time to time. For these purposes, the ADC Call Category (Transfer Charge Calls) shall be ascertained at the time when the Answer Signal is generated. 5.2 If, prior to the date of the Agreement, either Party has requested the Director General pursuant to Condition 13.5A of the BT Licence to reduce the contribution to be made by the Operator towards BT's Access Deficit, then payment of the contribution referred to in such request shall be suspended until the Director General has dealt with the request. 5.3 If, following a request referred to in paragraph 5.2, the Director General determines not to reduce the contribution or determines that a partial contribution shall be payable by the Operator towards BT's Access Deficit, such contribution shall be payable accordingly with effect from the date of this Agreement. The Operator shall pay any outstanding contribution not later than one month after the date of such determination. 5.4 If, following a request referred to in paragraph 5.2, the Director General determines that no contribution shall be payable by the Operator towards BT's Access Deficit no such contribution shall be payable under paragraph 5.1. 5.5 If the Director General at any time determines pursuant to Condition 13.5A of the BT Licence that the contribution payable by the Operator towards BT's Access Deficit should be varied or a contribution becomes payable in accordance with Condition 13.5A of the BT Licence then the Agreement shall be varied accordingly. 6. COMMENCEMENT 6.1 The Operator shall convey Operator Telephony Calls handed over from the BT System commencing on a date to be agreed in writing by the Parties. PAGE 130 of 138 273 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 7. REVIEW 7.1 The Review Date for charges for the conveyance of Operator Telephony Calls shall be 1 April each year. PAGE 131 of 138 274 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 545 OPERATOR INTERNATIONAL INCOMING CALLS FROM AUTHORISED OVERSEAS SYSTEMS VIA THE BT SYSTEM HANDED OVER TO THE OPERATOR SYSTEM 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "OPERATOR SEGMENT CALL" an Operator International Incoming Call handed over from the BT System to the Operator System, switched by one or more other Operator Tandem Exchanges, to an Operator Network Termination Point. 2. DESCRIPTION OF SERVICES 2.1 Subject to the provisions of this Schedule, the Operator shall convey Operator International Incoming Calls handed over from the BT System to the appropriate Operator Network Termination Point. 2.2 Operator Telephony Calls, Operator Transit Calls, Operator BT to BT Transit Calls and Calls to Ancillary Services are not conveyed pursuant to this Schedule. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 The Operator's obligation to convey Operator ISDN International Incoming Calls is subject to the Authorised Overseas System and the respective Systems and all relevant Switch Connections of both Parties being suitable for the conveyance of Operator ISDN International Incoming Calls. 2.5 The Operator shall not be obliged under this Schedule to make its System suitable for the conveyance of Operator ISDN International Incoming Calls or to provide equipment to its Customers enabling Operator ISDN International Incoming Calls. 2.6 The Operator shall convey Operator International Incoming Calls during those periods of time and at the same standard and quality of service as the Operator conveys similar Calls. PAGE 132 of 138 275 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2.7 Each Party shall correct faults which occur in its System which affect the conveyance of Operator International Incoming Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 3. ROUTING 3.1 The conveyance of Operator International Incoming Calls shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 For the conveyance of each Operator International Incoming Call by the Operator, BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. 4.2 For the conveyance of each Operator International Incoming Call by the Operator, which is also a Transfer Charge Call, the Operator shall pay BT a charge calculated in accordance with the rates for such a Call specified from time to time in the Carrier Price List, and BT shall pay no charge to the Operator pursuant to paragraph 4.1. 5. COMMENCEMENT 5.1 The Operator shall convey Operator International Incoming Calls handed over from the BT System commencing on a date to be agreed in writing by the Parties. 6. REVIEW 6.1 The Review Date for Operator International Incoming Calls shall be 1 April each year. PAGE 133 of 138 276 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX C SCHEDULE 546 OPERATOR BT TO BT TRANSIT CALLS (PORTED) VIA THE OPERATOR SYSTEM 1. DEFINITIONS 1.1 In this Schedule, a reference to a paragraph or Appendix unless stated otherwise, is to a paragraph or Appendix of this Schedule. Words and expressions have the meaning given in Annex D, except as shown below: "CENTREX" a partition of an Exchange used to provide business features and short code dialling as required by Customers; "DDI" direct dialling in; "DONOR" the Party from whose System the Number is being ported; "DONOR SYSTEM" the System from which the Number is being ported; "OPERATOR SEGMENT an Operator BT to BT Transit Call, handed over from BT TO BT TRANSIT CALL" the BT System to the Operator System, switched by one or more Operator Exchanges, and handed over from the Operator System to the BT System; "NUMBER" shall have the meaning ascribed thereto in Condition 34B of the BT Licence, and for the purposes of this Agreement there shall be excluded Numbers allocated to ISDN exchange lines and to Number Groups used for Centrex, DDI private branch exchanges or other private branch exchange purposes; "NUMBER GROUP" a range of consecutive Numbers used as a group by a Party for certain functional or Customer purposes; "NUMBER PORTABILITY" an arrangement between the Parties whereby a Customer ceases to be provided with a Network Termination Point by the PAGE 134 of 138 277 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Donor System and such Customer (at the same address and at the same set of premises) is provided with a Network Termination Point by the Recipient System, such Network Termination Point having the same Number as had the Number Termination Point ceased on the Donor System; "RECIPIENT" the Party to whose System the Number is being ported; "RECIPIENT SYSTEM" the System to which the Number is being ported. 2. DESCRIPTION OF SERVICES 2.1 Subject to the provisions of this Schedule, the Operator shall convey Operator BT to BT Transit Call handed over from the BT System to the Operator System, to be handed back by the Operator System (as the Donor System) to the BT System (as the Recipient System) pursuant to Schedule 04 (Number Portability) for delivery to a BT Network Termination Point. 2.2 Operator Telephony Calls, Operator Transit Calls and Operator BT to BT Transit Calls (other than for the purposes of Number Portability), are not conveyed pursuant to this Schedule. 2.3 The Parties shall agree in advance all necessary technical requirements, including Call set-up and cleardown sequences, for the conveyance of Calls pursuant to this Schedule. 2.4 The Operator's obligation to convey Operator ISDN BT to BT Transit Calls is subject to the respective Systems and all relevant Switch Connections of both Parties being suitable for the conveyance of Operator ISDN BT to BT Transit Calls. 2.5 The Operator shall convey Operator BT to BT Transit calls during those periods of time and at the same standard and quality of service as the Operator conveys similar Calls. 2.6 Each Party shall correct faults which occur in its System which affect the conveyance of Operator BT to BT Transit Calls in accordance with such Party's normal engineering practices. For the avoidance of doubt, neither Party warrants that its System is, or will be, free from faults. 3. ROUTING PAGE 135 of 138 278 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 3.1 The conveyance of Operator BT to BT Transit Calls, shall be in accordance with the routing principles specified in Annex A. 4. CHARGING 4.1 For the conveyance of each Operator BT to BT Transit Call by the Operator, BT shall pay the Operator a charge calculated in accordance with the rate for such a Call specified from time to time in the Carrier Price List. 5. REVIEW 5.1 The Review Date for Operator BT to BT Transit Calls shall be 1 April each year. PAGE 136 of 138 279 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- SUBJECT TO CONTRACT This copy of the Revised Standard Interconnect Agreement is provided for information and represents the status of the Agreement at the time it was prepared. To enable identification Issue Numbers appear in the footer of each part. Because the Revised Standard Interconnect Agreement is subject to ongoing development and improvement there may be changes. It will therefore be necessary from time to time to check that this document represents the current state of the Revised Standard Interconnect Agreement. This document is not intended to be a formal offer on the part of BT. At the conclusion of any discussions between an Operator and BT a Revised Standard Contract will be prepared for signature based upon the latest version of the Revised Standard Interconnect Agreement. PAGE 137 of 138 280 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- PAGE 138 of 138 281 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- ANNEX D DEFINITIONS In this Agreement, words and expressions have the following meanings: "ACCESS CODE" a three or four digit code or a number commencing with the digits 0800 followed by a six or seven digit number which initiates an Indirect Access Call; "ACCESS DEFICIT CONTRIBUTION" the contribution to the funding of the BT Access Deficit payable by the Operator to BT pursuant to Condition 13.5A.3 and assessed in accordance with Condition 13.5A.4 both being Conditions of the BT Licence; "ACO PERIOD" the period covered by an Advance Capacity Order; "ACT" Telecommunications Act 1984; "ACTUAL CHARGE" the charge (or the means of calculating that charge) for a Standard Service paid by a Network Provider to BT in respect of the whole or part of the Financial Year In Question which is less than the Interim Charge (whether as a result of the operation of Condition 24F or following the consent of the Director General to that lesser charge pursuant to Condition 16B.5 being Conditions of the BT Licence); "ADDRESS COMPLETE MESSAGE" a signalling message required by the originating System to indicate that sufficient address digits have been received and that a transmission path should be set up; "ADVANCE CAPACITY ORDER" that part of the Capacity Profile which sets out the Capacity ordering intentions of the relevant Party over the first four months of the Capacity Profile and has the contractual consequences outlined in Annex A; PAGE 1 of 31 282 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "AFN" the first three digits immediately after a Director Area Number; "AGREEMENT" this agreement, the Carrier Price List, the Annexes, Schedules, Appendices and Specifications; "ANCILLARY SERVICE" (a) a service which does not solely comprise the conveyance of Calls; or (b) a Call, except a Transfer Charge Call, where the Calling Party is not required to pay all of the charges associated with that Call; or (c) a Call where the Calling Party is charged at a rate which includes an element over and above the charge for conveyance of that Call; "ANNEX" annex A, B, C or D attached to this Agreement; "ANSWER SIGNAL" the signal required by the originating network to indicate that the transmission path is complete; "APPENDIX" an appendix to a Schedule in Annex C; "APPROVED AUDITOR" a Party's auditor appointed in accordance with the Companies Act 1985 or such firm of chartered accountants which a Party may (subject to the other Party's written approval) appoint (such approval not to be unreasonably withheld or delayed); "ASR" the Answer Seize Ratio expressed as a percentage of Calls, which were successfully switched and which received an answer, compared to Call attempts, during a particular measurement period; "ASSOCIATED COMPANY" in relation to a Party:- PAGE 2 of 31 283 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) its Subsidiary or Holding Company of that Party or another Subsidiary of such Holding Company; or (b) an associated company (as defined in Statement of Standard Accounting Practice No. 1 issued by the Institute of Chartered Accountants in England and Wales) of that Party's Holding Company; "AUTHORISED OVERSEAS SYSTEM" has the meaning in schedule 1 part 1 of the BT Licence as in force at the date of this Agreement; "BILLING INFORMATION" such information provided pursuant to Annex B by one Party to the other including, without limitation: (a) such information as is necessary to ascertain the charges payable by each Party under this Agreement; and (b) Interconnect Usage Reports, TIBS Billing Information and Refund Reports, information provided by INCA, and by the Operator's equivalent of TIBS and/or INCA; "BILLING PARTY" the Party to whom charges are payable by the other Party pursuant to this Agreement; "BILLING PERIOD" unless otherwise agreed in writing, the period of a calendar month commencing on the first day of a month; "BILLING SYSTEM" a system to collate Billing Information and prepare invoices relating to charges payable by each Party under this Agreement; "BRITISH ISLES" United Kingdom, Channel Islands, Isle of Man and Republic of Ireland; "BT" British Telecommunications public limited company; PAGE 3 of 31 284 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT'S ACCESS DEFICIT" has the meaning given to Access Deficit in Condition 13.5A.3 of the BT Licence as in force at the date of this Agreement; "BT ANALOGUE LOCAL EXCHANGE" a TXE 4 or TXE 4A analogue local Switch in OR "BT ALE" the BT System; "BT BASIC INTERNATIONAL a Call, received by the Operator System from INCOMING CALL" an Authorised Overseas System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; "BT BASIC INTERNATIONAL OUTGOING a Call, destined for an Authorised Overseas CALL" System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "BT BASIC OPERATOR TO OPERATOR a Call comprising the minimum service TRANSIT CALL" features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System destined for the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "BT BASIC TELEPHONY CALL" a Call, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; PAGE 4 of 31 285 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT BASIC TRANSIT CALL" a Call comprising the minimum service features necessary to support a speech path through the BT System, handed over from the Operator System to the BT System destined for a Third Party Operator's system, being a Call available for the conveyance of Messages; "BT CHARGE GROUP" a geographical area designated from time to time by BT, and used for retail charges as specified in the BT Retail Price List; BT DIGITAL LOCAL EXCHANGE" OR a digital Switch in the BT System which "BT DLE" Switch connects by that Switch alone Calls from analogue exchanges, RCUs or Exchange Lines; "BT DJSU" a digital tandem Switch in the London Director Area (currently known as a Digital Junction Switching Unit) in the BT System which provides access to certain BT Digital Local Exchanges, BT DLTEs, BT ALEs and/or other BT DJSUs in such Director Area and adjacent BT Charge Groups; "BT DLTE" a digital Switch in the BT System which Switch connects by that Switch alone Calls from analogue exchanges, RCUs or Exchange Lines and which provides access to directly connected BT Digital Local Exchanges and directly connected BT ALEs; "BT DMSU" a digital tandem Switch (currently known as a Digital Main Switching Unit) in the BT System, which provides access to other BT Exchanges; "BT EXCHANGE" a BT Analogue Local Exchange, a BT Digital Local Exchange, a BT DLTE, a BT Tandem Exchange or a BT ISC and such other Switch which the Parties may from time to time agree is a BT Exchange; PAGE 5 of 31 286 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT INTERNATIONAL INCOMING CALL" either a BT Basic International Incoming Call or a BT ISDN International Incoming Call; "BT INTERNATIONAL OUTGOING CALL" either a BT Basic International Outgoing Call or a BT ISDN International Outgoing Call; "BT ISC" a BT Exchange notified to the Operator pursuant to paragraph 3.1.1 of Annex A which is used exclusively for switching Calls to, or received from Authorised Overseas Systems; "BT ISDN INTERNATIONAL INCOMING a Call, received by the Operator System from CALL" an Authorised Overseas System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; "BT ISDN INTERNATIONAL OUTGOING a Call, destined for an Authorised Overseas CALL" System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "BT ISDN OPERATOR TO OPERATOR a Call comprising service features TRANSIT CALL" additional to the minimum features PAGE 6 of 31 287 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "BT ISDN TELEPHONY CALL" a Call, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for a telephone number of a BT Network Termination Point, being a Call available for the conveyance of Messages; "BT ISDN TRANSIT CALL" a Call comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the Operator System to the BT System, destined for a Third Party Operator's system, being a Call available for the conveyance of Messages; "BT LICENCE" the licence granted to BT pursuant to section 7 of the Act under which BT runs the BT System; "BT OPERATOR" a person who answers Calls for directory or operator assistance, Emergency Calls and other similar Calls for BT; PAGE 7 of 31 288 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "BT OPERATOR TO OPERATOR either a BT Basic Operator to Operator TRANSIT CALL" Transit Call or a BT ISDN Operator to Operator Transit Call; "BT PAYPHONE ACCESS LEVY" the charge payable by the Operator for the use of a BT Public Call Box or a BT Temporary Call Box (each as defined in Condition 11 of the BT Licence) to originate a Call. "BT PRS CALL" a Call to a PRS: (a) for which if such Call originated on the BT System, the person responsible for payment would pay a charge higher than that which would apply to a directly dialled BT Telephony Call of equivalent distance and duration; and (b) where payment is made by BT to a BT PRS Service Provider and where payment takes into account the number or duration of Calls to that BT PRS Service Provider; "BT PRS SERVICE PROVIDER" a person having a contract with BT for the delivery of BT PRS Calls; "BT PRS SUB SERVICE PROVIDER" a person having an arrangement for the delivery of BT PRS Calls, whether or not legally binding, with a BT PRS Service Provider; "BT RETAIL PRICE LIST" the retail price list published by BT from time to time pursuant to Condition 16 of the BT Licence; "BT SWITCH CONNECTION" a BT Exchange at which Calls handed over: (a) from the Operator System are initially switched; or PAGE 8 of 31 289 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (b) to the Operator System are finally switched; by BT; "BT SYSTEM" the applicable system described in Annex A of the BT Licence as in force at the date of this Agreement; "BT TANDEM EXCHANGE" a BT DMSU or a BT DJSU; "BT TELEMESSAGE" has the meaning given to the term "Telemessage" in the BT Retail Price List; "BT TELEPHONY CALL" either a BT Basic Telephony Call or a BT ISDN Telephony Call; "BT TRANSIT CALL" either a BT Basic Transit Call or a BT ISDN Transit Call; "CALL" a transmission path through Telecommunication Systems for the sending of Messages, and a reference to conveyance of a Call by a Party means the establishment by that Party of a transmission path through that Party's System and the conveyance by that Party in accordance with this Agreement of a Message (if any) over such transmission path; "CALLED PARTY" a person who receives a Call; "CALLING PARTY" a person who initiates a Call; "CAPACITY" capacity in units of 2 Mbit/s on Interconnect Links; "CAPACITY ORDER" an order for Capacity placed by one Party on the other, pursuant to Annex A; "CAPACITY PROFILE" a profile of future Capacity ordering intentions over a 12 month period as presented by one Party to the other pursuant to Annex A; "CAPACITY PROVISION" the provision of new or additional Capacity; PAGE 9 of 31 290 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "CAPACITY RE-ARRANGEMENT" the re-use of Capacity previously provided by one Party to the other, where, in each case, the Point of Connection and the buildings containing the Switch Connections remain the same; "CARRIER PRICE LIST" the price list having that name which contains charges for Standard Services consistent with the full list of Standard Services maintained by BT pursuant to Condition 16B.8 of the BT Licence, charges for services provided by the Operator and some other charges and information; "CARRIER CHARGE BAND REFERENCE such reference data (including EBC matrix, DATA" complementary retail file and associated files) as BT shall from time to time make available to the Operator, being data for the preparation and validation of Billing Information for Calls; "CHARGEABLE CALL" a Call for which a charge is made pursuant to this Agreement; "CHARGEABLE CALL DURATION" the duration of a Chargeable Call measured: (a) for a Call (other than an International Call), to the nearest second (or such greater accuracy as the Parties may agree in writing); (b) for an International Call to not less than the nearest second; commencing with the receipt of an Answer Signal and ceasing with the receipt of a Release Signal at the point of recording by the Party recording the relevant Billing Information; "CLI" has the meaning given to Calling Line Identification in the draft "Code of Practice for Network Operators in relation to Calling Line Identification Display Services and other Related Services" Version 6 dated 16 PAGE 10 of 31 291 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- November 1994 as the same may be amended or replaced from time to time; "COMPETITIVE STANDARD SERVICE" a Standard Service the market for which is determined by the Director General to be competitive pursuant to Condition 16B.6 of the BT Licence; "CONDITION" a condition of the BT Licence or the Operator Licence as the case may be as in force at the date of this Agreement, unless otherwise stated; "CONFIDENTIAL INFORMATION" any information, in whatever form, which in the case of written or electronic information is clearly designated as confidential and which, in the case of information disclosed orally, is identified at the time of disclosure as being confidential or is by its nature confidential and including such Confidential Information already disclosed by either Party to the other prior to the date of this Agreement but excluding any information which: (a) is in or comes into the public domain other than by reason of a breach of this Agreement; or (b) is previously known on a non-confidential basis to the Receiving Party at the time of its receipt; or (c) is independently generated, developed or discovered at any time by or for the Receiving Party; or (d) is subsequently received from a Third Party without any restriction on disclosure; "CONVEYANCE STANDARD SERVICE" a Standard Service the charge for which may be determined pursuant to Condition 13.5A of the BT Licence; "CUSTOMER" as the context requires: PAGE 11 of 31 292 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) a person having a contract with either or both Parties for the provision of telecommunication services by means of that Party's System; or (b) a user of telecommunication apparatus directly connected to the BT System or the Operator System; or (c) a person having a contract with a reseller of telecommunication services to be provided by means of either the BT System or the Operator System or a user of telecommunication apparatus authorised by that person; "CUSTOMER SITED INTERCONNECT" an Interconnect Link provided pursuant to Schedule 130 of Annex C; "CUSTOMER SERVICE PLAN" a document containing details of individuals, addresses and telephone numbers for ordering or maintenance of the services provided pursuant to this Agreement; "D" the first digit immediately following the NNG; "DATA MANAGEMENT AMENDMENT" such reconfiguration of the BT System or the Operator System as is necessary for access, routing and charging of Calls; "DAYTIME" the period of time between 0800 and 1800 on Monday to Friday or such other period of time as shall be agreed between the Parties; "DE" the first two digits immediately following the NNG; "DEFAULT INTEREST RATE" four per cent (4%) above the rate per annum as displayed on the "LIBP" page (or such other page whatever its designation on which London Inter-Bank Offered Rates of major banks for three months sterling PAGE 12 of 31 293 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- deposits are for the time being displayed) on the Reuters Monitor Money Rates Services provided that if the offered rates of less than two banks are so displayed then "LIBOR" shall be the arithmetic mean as determined by the Party charging interest of the offered quotations of two leading clearing banks in London, selected by such Party for three months sterling deposits. Such interest shall be calculated on a daily basis; "DIRECTOR AREA" an area comprising certain major United Kingdom conurbations which area is delimited by a Director Area Number; "DIRECTOR AREA NUMBER" the code (excluding the leading zero) comprising 3 digits for telephone numbers in certain major United Kingdom conurbations; "DIRECTOR GENERAL" the Director General of Telecommunications; "DISCLOSING PARTY" a Party disclosing information to the other Party; "DISPUTE" a disagreement between the Parties excluding breaches of this Agreement; "DUE DATE" a date which is 30 calendar days after the date of an invoice; "E" the first digit immediately following the D; "EFFECTIVE DATE" a date referred to by that name in the Carrier Price List or in a Schedule being the date on which a charge or a variation of a charge referred to in the Carrier Price List or a Schedule takes effect; "EMERGENCY CALL" a 999 or 112 Call handed over from the Operator System to the BT System; "EMERGENCY CENTRE" premises where BT Operators answer Emergency Calls; PAGE 13 of 31 294 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "EMERGENCY ORGANISATION" the relevant local public police, fire, ambulance and coastguard services and other similar organisation providing assistance to the public in emergencies; "ETSI" the European Telecommunications Standards Institute; "EVENING" periods of time not being either Daytime or Weekend or such other period of time as shall be agreed between the Parties; "EXCHANGE LINE" has the meaning in schedule 1 part 1 of the BT Licence as in force at the date of this Agreement; "FINAL CHARGE" in the case of charges payable to BT the charge (or the means of calculating that charge) for a Standard Service (other than a Competitive Standard Service) for each Financial Year In Question recalculated and redetermined by the Director General based on the Financial Statement for the Financial Year In Question in accordance with Condition 13.5A.3B or 13.5C.6 of the BT Licence; and in the case of charges payable to the Operator the charge (or the means of calculating that charge) for a service provided by the Operator to BT for each Financial Year In Question agreed between the Parties in writing or determined by the Director General based on the audited figures relating to that service for the relevant year or, if those figures are not available, the most recent audited figures which are available or, if no audited figures are available the best information available to the Director General in accordance with Condition 13.5B.1A of the BT Licence; "FINANCIAL STATEMENT" has the meaning in Condition 20B of the BT Licence; "FINANCIAL YEAR" a period of one year used for accounting purposes; PAGE 14 of 31 295 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "FINANCIAL YEAR IN QUESTION" a period of one year ending each 31 March in respect of which a charge is payable for services provided during that year; "FORECAST" unless otherwise specified, has the meaning in Condition 13.5A.3A of the BT Licence; "FRBS STATEMENT" has the meaning in Condition 13.5A.3C (b) of the BT Licence; "FULLY PROVIDED" Capacity on a Traffic Route which will carry all the relevant Traffic Streams at the planned grade of service; "G703 INTERFACE" an interface meeting the requirements of ITU-T Recommendation G703 (Geneva 1991); "GENERIC ELECTRICAL AND BT's Generic Electrical and Physical PHYSICAL INTERFACE SPECIFICATION" Interface Specification, as amended or substituted from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 or 3.3 of Annex A; "GENERIC SDH INTERFACE BT's Generic Synchronous Digital Hierarchy SPECIFICATION" Interface Specification, as amended or substituted from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 and 3.3 of Annex A; "GENERIC C7 SIGNALLING BT's Generic C7 Signalling Interface INTERFACE SPECIFICATION" Specification, as amended or substituted from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 or 3.3 of Annex A; "GENERIC TRANSMISSION BT's Generic Transmission Interface INTERFACE SPECIFICATION" Specification, as amended or substituted PAGE 15 of 31 296 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- from time to time with the Parties' agreement including without limitation changes pursuant to paragraphs 3.2 or 3.3 of Annex A; "GSM" Global System for Mobile Communications; "HOLDING COMPANY" has the meaning in sections 736 and 736A of the Companies Act 1985; "INCA" BT's Inter Network Call Accounting System as the same may be developed from time to time; "INCOMING CALLS" Calls handed over at a Point of Connection by BT to the Operator other than Indirect Access Calls; "INDIRECT ACCESS CALL" a Call where a Calling Party on one Party's System has chosen to convey that Call to the other Party's System by prefixing that Call with an Access Code; "IN-SPAN INTERCONNECT" an Interconnect Link provided pursuant to Schedule 01; "INTELLECTUAL PROPERTY RIGHTS" any patent, petty patent, registered design, registered trade or service mark, copyright, design right, semi-conductor topography right, know-how or any similar right exercisable in any part of the world including any application therefor; "INTERCONNECT EXTENSION CIRCUIT" a Link, being part of a 2Mbit/s ISI OR "IEC" Interconnect Link, between the Muliplexor in a Remote Switch Connection and the Multiplexor terminating the ISI Interconnect Link; "INTERCONNECT LINK" a Link connecting a BT Switch Connection and an Operator Switch Connection passing through a Point of Connection; PAGE 16 of 31 297 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "INTERCONNECT USAGE REPORT" a report in the same or substantially the same form as specified in the Billing Manual; "INTERIM CHARGE" in the case charges payable to BT the charge (or the means of calculating that charge) for a Standard Service (other than a Competitive Standard Service) for each Financial Year In Question determined by the Director General in accordance with Condition 13.5A.3A or 13.5C.6 of the BT Licence; and in the case of charges payable to the Operator the charge (or the means of calculating that charge) for a service provided by the Operator to BT for each Financial Year In Question agreed between the Parties in writing or determined by the Director General in accordance with Condition 13.5B.1A of the BT Licence; "INTERNATIONAL CALL" a Call received by the BT System from: (a) an Authorised Overseas System; or (b) the Operator System destined for an Authorised Overseas System; or a Call received by the Operator System from: (a) an Authorised Overseas System, or (b) the BT System destined for an Authorised Overseas System; "INTRABUILDING LINK" a connection between a BT or an Operator Switch Connection and the G703 Interface on the Multiplexor forming part of an Interconnect Link; "INVOICE DATE" the date on which an invoice is despatched; "ISI INTERCONNECT LINK" a portion of an Interconnect Link being that cable (or fibres within that cable) and LTE's between an Operator building and a BT building over which a number of PAGE 17 of 31 298 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- 2Mbit/s ISI Interconnect Links are provided; "ITU-T" the Telecommunications Standards Bureau (formerly the International Telegraph and Telephone Consultative Committee) of the International Telecommunications Union; "LAND MOBILE RADIO SERVICE" has the meaning in Condition 18 of the BT Licence; "LICENCE" the BT Licence or, as the context requires, the Operator Licence; "LINK" telecommunication apparatus (which has the meaning in paragraph 1 (1) of schedule 2 to the Act as in force at the date of this Agreement) necessary to establish one or more transmission paths; "MANUAL" manual referred to in this Agreement of working practices between the Parties; "MESSAGE" has the meaning in schedule 1, part 1 of the BT Licence as in force at the date of this Agreement; "MOBILE CALL" a Call to an Operator Customer using a mobile handset if the Operator Customer using mobile terminal apparatus would receive that Call by means of wireless telegraphy if the handset was switched on and within range of a base transceiver station forming part of the Operator System unless: (a) the Operator Customer on a temporary basis has chosen to divert that Call to another number; or (b) the Operator System when the mobile handset is turned off or out of range from a base transceiver station returns a message to that effect to the Calling Party; PAGE 18 of 31 299 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "MULTIPLEXOR" the multiplexing equipment which serves an Intrabuilding Link and where appropriate an IEC; "NETWORK PROVIDER" in relation to each Standard Service, any person who has required it, and with whom BT is obliged to enter into an agreement to provide that Standard Service under Condition 13 of the BT Licence; "NETWORK TERMINATION POINT" has the meaning in schedule 1 part 1 of the BT Licence as in force at the date of this Agreement; "NEW CHARGE" a charge for a Standard Service, which is less than the charge for that Standard Service as determined by the Director General pursuant to Condition 13, following the consent of the Director General pursuant to Condition 16B.5 both being Conditions of the BT Licence; "NICC" Network Interoperability Consultative Committee; "NNG" a national number group being the code (excluding the leading zero) comprising for UK telephone numbers (a) for geographical numbers (excluding Director Area Number,) four digits (b) for non-geographic numbers, three digits; "NON CONVEYANCE STANDARD SERVICE" a Standard Service which is not a Conveyance Standard Service; "NUMBER RANGE" Director Area Number, NNG, AFN, D, E, and/or DE as appropriate; "NUMBER TRANSLATION SERVICES CALL" a Call to non-geographic telephone numbers (other than a Calls destined for a mobile handset) if the Party receiving the Call translates the dialled digits and routes the Call in accordance with such translation, including without limitation, PRS Calls, Local Call Fee Access Services Calls, Freephone Calls, National Call Services Calls and other specially charged services; PAGE 19 of 31 300 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "OCHC" an operator Call handling centre which routes Calls to BT Operators from Customers seeking assistance with connection to another telephone number; "OFTEL INTEREST RATE" three eighths of one per cent (3/8%) above the London Inter Bank Offered Rate being the rate per annum of the offered quotation for sterling deposits for delivery on the due date for payment for a period of three months as displayed on page 3750 on the Telerate Service (or any other page that may replace page 3750 on that service) at or about 11 am London time on the due date of payment provided that if such a rate is not so displayed London Inter Bank Offered Rate shall mean the rate quoted by National Westminster Bank PLC to leading banks in the London interbank market at or about 11 am London time on the due date of payment for the offering of sterling deposits of a comparable amount for a period of three months. Such interest shall be calculated on a daily basis; "OPERATOR" the other Party to this Agreement; "OPERATOR BASIC a Call comprising the minimum service BT TO BT TRANSIT CALL" features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System destined for the BT System, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "OPERATOR BASIC INTERNATIONAL a Call, received by the BT System from an INCOMING CALL" Authorised Overseas System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from BT System to the Operator System destined for a telephone number of an Operator Network Termination Point, if a rate for such a Call is specified from time to time in the Carrier PAGE 20 of 31 301 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Price List, being a Call available for the conveyance of messages; "OPERATOR BASIC INTERNATIONAL a Call, destined for an Authorised Overseas OUTGOING CALL" System, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "OPERATOR BASIC TELEPHONY CALL" a Call, comprising the minimum service features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System, destined for a telephone number of an Operator Network Termination Point, being a Call available for the conveyance of Messages; "OPERATOR BASIC TRANSIT CALL" a Call comprising the minimum service features necessary to support a speech path through the BT System, handed over from the BT System to the Operator System destined for a Third Party Operator's system, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "OPERATOR BT TO BT TRANSIT CALL" either an Operator Basic BT to BT Transit Call or an Operator ISDN BT to BT Transit Call; "OPERATOR EXCHANGE" an Operator Local Exchange, Operator Mobile Exchange or Operator Tandem Exchange and such other Switch which the Parties may from time to time agree is an Operator Exchange; "OPERATOR INTERNATIONAL either an Operator Basic International INCOMING CALL" Incoming Call or an Operator ISDN International Incoming Call; PAGE 21 of 31 302 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "OPERATOR INTERNATIONAL either an Operator Basic International OUTGOING CALL" Outgoing Call or an Operator ISDN International Outgoing Call; "OPERATOR ISDN BT TO BT a Call comprising service features TRANSIT CALL" additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for the BT System, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "OPERATOR ISDN INTERNATIONAL a Call, received by the BT System from an INCOMING CALL" Authorised Overseas System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for a telephone number of an Operator Network Termination Point, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "OPERATOR ISDN INTERNATIONAL a Call, destined for an Authorised Overseas OUTGOING CALL" System, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, PAGE 22 of 31 303 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- handed over from the BT System to the Operator System, if a rate for such a Call is specified from time to time in the Carrier Price List, being a Call available for the conveyance of Messages; "OPERATOR ISDN TELEPHONY CALL" a Call, comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for a telephone number of an Operator Network Termination Point, being a Call available for the conveyance of Messages; "OPERATOR ISDN TRANSIT CALL" a Call comprising service features additional to the minimum features necessary to support a speech path through the BT System, being service features described as bearer services, teleservices or supplementary services in the ETSI Memorandum of Understanding on the Implementation of European ISDN Service, handed over from the BT System to the Operator System, destined for a Third Party Operator's system, if a rate for such a Call is specified from time to time in the Carrier Price List being a Call available for the conveyance of Messages; "OPERATOR LICENCE" the licence granted to the Operator pursuant to section 7 of the Act under which the Operator runs the Operator System; "OPERATOR LICENSED AREA" the geographical area in which the Operator is permitted pursuant to the Operator Licence to provide telecommunication services; "OPERATOR LOCAL EXCHANGE" a digital Switch, except an Operator Mobile Exchange, in the Operator System which Switch connects by that Switch alone Calls PAGE 23 of 31 304 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- from Network Termination Points in the Operator System; "OPERATOR MOBILE EXCHANGE" a digital Switch in the Operator's System which Switch connects by that Switch those Calls from base stations and/or base station controllers in the Operator System providing a Land Mobile Radio Service for handsets; "OPERATOR'S OPERATOR" a person who answers Calls for directory or operator assistance or other similar Calls for the Operator; "OPERATOR PRS CALL" a Call to a PRS: (a) for which if originated on the Operator System, the person responsible for payment would pay at a rate higher than that which would apply to a directly dialled Operator Telephony Call of equivalent distance and duration; and (b) if payment is made by the Operator to a Operator PRS Service Provider and if payment takes into account the number or duration of Calls to that the Operator PRS Service Provider; "OPERATOR PRS SERVICE PROVIDER" a person having a contract with the Operator for the delivery of Operator PRS Calls; "OPERATOR PRS SUB SERVICE PROVIDER" a person having an arrangement for the delivery of Operator PRS Calls, whether or not legally binding, with an Operator PRS Service Provider, directly or indirectly; "OPERATOR SYSTEM" the Telecommunication System run by the Operator pursuant to the Operator Licence as in force at the date of this Agreement; "OPERATOR SWITCH CONNECTION" an Operator Exchange at which Calls handed over: PAGE 24 of 31 305 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (a) from the BT System are initially switched; or (b) to the BT System are finally switched; by the Operator; "OPERATOR TANDEM EXCHANGE" a digital tandem Switch in the Operator System which provides access to Operator Local Exchanges or Operator Mobile Exchanges; "OPERATOR TELEPHONY CALL" either an Operator Basic Telephony Call or an Operator ISDN Telephony Call; "OPERATOR TRANSIT CALL" either an Operator Basic Transit Call or an Operator ISDN Transit Call; "OUTGOING CALL" a Call handed over at a Point of Connection by the Operator to BT; "PARENT BT EXCHANGE" a BT Tandem Exchange which has a direct connection to a BT DLE, BT DLTE or BT ALE for the conveyance of Calls in the ordinary course of business; "PARTY" a party to this Agreement; "PATH PROTECTION" resilience improvement of an ISI Interconnect Link as described in Schedule 01 of Annex C; "PDH" plesiochronous digital hierarchy; "POINT OF CONNECTION" a physical point where the BT System and the Operator System are connected for Calls to be handed over from one System to the other; "PRE-INTERIM CHARGE" If the Director General has not determined the Interim Charge (or the means of calculating that charge) for the Financial Year In Question; in the case of charges payable to BT, for each Standard Service (other than a PAGE 25 of 31 306 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- Competitive Standard Service), the charge fixed by BT for each such Standard Service; and in the case of charges payable to the Operator, for each service provided by the Operator to BT, the charge fixed by the Operator for each such service; "PRS" OR "PREMIUM RATE SERVICE" an entertainment or information service: (a) which is accessed by means of a Call and consists of, or includes the sending of, speech, music, other sounds or signals to the Calling Party; and (b) for which payment is made by means of Call charges; "PRS FRAUD" either: a loss suffered by the Operator because of the non payment of charges for BT PRS Calls, in circumstances when the BT PRS Service Provider or the BT PRS Sub Service Provider organises or arranges for BT PRS Calls to be made to his PRS in circumstances when there is a reasonable expectation that the Calling Party or the person responsible for payment does not intend to pay or will seek to avoid payment for all or part of the Call charges; or a loss suffered by BT because of the non payment of charges for Operator PRS Calls, in circumstances when the Operator PRS Service Provider or the Operator PRS Sub Service Provider organises or arranges for Operator PRS Calls to be made to his PRS in circumstances when there is a reasonable expectation that the Calling Party or the person responsible for payment does not intend to pay or will seek to avoid payment for all or part of the Call charges; PAGE 26 of 31 307 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "PURCHASER" the Party to whom Capacity is provided by the Supplier; "QUALITY SCHEDULE" has the meaning in Condition 17C of the BT Licence; "QUARTER DAYS" 1 January, 1 April, 1 July and 1 October in each and every year; "RCU" a remote concentrator unit supported by a BT DLTE or a BT DLE; "READY FOR SERVICE DATE" the date on which testing of Capacity at a Switch Connection is satisfactorily completed and such Capacity is ready for service (in accordance with this Agreement); "READY FOR TEST DATE" the date on which Capacity at a Switch Connection is Ready for Testing; "READY FOR TESTING" when the Supplier has satisfactorily completed the provisioning of that part of an Interconnect Link that is under his direct control; "RECEIVING PARTY" a Party receiving information from the Disclosing Party; "RELEASE SIGNAL" a signal which indicates that the transmission path of a Call has been disconnected; "RELEVANT CONNECTABLE SYSTEM" has the meaning in Condition 13.9 of the BT Licence; "REMOTE SWITCH CONNECTION" a BT Switch Connection or an Operator Switch Connection which: (a) is accessed via a BT or Operator building notified from time to time pursuant to paragraph 3 of Annex A as being suitable for supporting IECs; and (b) is connected by an BT IEC or an Operator IEC, as the context requires; PAGE 27 of 31 308 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "REVIEW DATE" a date referred to by that name in this Agreement or in a Schedule which entitles either Party to serve a review notice seeking to amend the charges referred to in the Carrier Price List or in that Schedule; "ROUTE AUGMENTATION" additional Capacity on an established Traffic Route; "ROUTE TYPE" the segregation of Capacity within a Traffic Route for the conveyance of certain Traffic Types; "SCHEDULE" a schedule in Annex C of this Agreement; "SDH" synchronous digital hierarchy; "SIGNALLING LINK" a 64 Kbit/s digital path within a 2 Mbit/sec Interconnect Link between two ITU-T 7 signalling nodes which is used for signalling; "SIGNALLING LINK SET" a pair of Signalling Links each within a separate 2 Mbit/s system on an Interconnect Link; "SPECIFICATION" one of the Generic Electrical and Physical Interface Specification, the Generic C7 Signalling Interface Specification, the Generic Transmission Interface Specification and the Generic SDH Interface Specification; "STANDARD SERVICE" a service, including, without limitation, a Competitive Standard Service, which a Network Provider has required from BT and which BT is obliged to provide, or to enter into an agreement to provide, under Condition 13 of the BT Licence; "SUBSIDIARY" has the meaning in sections 736 and 736A of the Companies Act 1985; "SUPPLIER" the Party providing Capacity to the other Party; PAGE 28 of 31 309 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "SWITCH" telecommunication apparatus within a System which performs the function of switching and routing Calls; "SWITCH CONNECTION" a BT Switch Connection or, as the context requires, an Operator Switch Connection; "SYSTEM" the BT System or, as the context requires, the Operator System; "SYSTEM ALTERATION" a change (other than a Data Management Amendment) to a Party's System, which requires a change to be made to the other Party's System to allow the continuance of the conveyance of Calls across a Point of Connection pursuant to this Agreement; "TARGET PERFORMANCE" has the meaning in Condition 17C of the BT Licence; "TECHNICAL MASTER PLAN" a document recording details of the Points of Connection and the plans for development of further Points of Connection; "TECHNICAL REVIEW MEETING" a technical meeting pursuant to paragraph 13 of Annex A; "TELECOMMUNICATION SYSTEM" a telecommunication system within the United Kingdom as defined in section 4 of the Act or an Authorised Overseas System; "THIRD PARTY" a person other than BT or the Operator; "THIRD PARTY INTERCONNECT" interconnect using a Third Party ISI Interconnect Link; "THIRD PARTY INTERCONNECT either: AGREEMENT" (a) an agreement between BT and a Third Party Operator pursuant to Condition 13 as it applies from time to time of the BT Licence or the equivalent Condition of the Third Party Operator licence; or PAGE 29 of 31 310 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- (b) an agreement between the Operator and a Third Party Operator pursuant to the Condition equivalent to Condition 13 of the BT Licence contained in either the Operator or Third Party Operator licences; "THIRD PARTY ISI INTERCONNECT an Interconnect Link as defined in Schedule LINK" 01; "THIRD PARTY OPERATOR" a person being neither the Operator nor BT who is licensed under the Act to run a Relevant Connectable System; "TIBS" BT's Telecommunications Input Billing System, which records information on certain Calls which use the services of a BT Operator or the operator of a Third Party; "TIBS BILLING INFORMATION reports in the same or substantially the AND REFUND REPORT" same form as in the Billing Manual; "TIBS INFORMATION" itemised Call records of the services provided by BT Operators or the operator of a Third Party to the Operator which would have resulted in a charge from BT had the Calling Parties been BT Customers, together with reports relating to Transfer Charge Calls, ineffective calls, and any other records which will result in charges to be paid by or to the Operator for such services; "TRAFFIC FORECAST" a forecast of traffic at a BT Switch Connection or Operator Switch Connection, such forecast provided by one Party to the other pursuant to paragraph 8 of Annex A; "TRAFFIC ROUTE" discrete and identifiable units of 2 Mbit/s Capacity within an Interconnect Link; "TRAFFIC STREAM" a group of Calls carried from a specific place in one Party's System to a specific place in the other Party's System; PAGE 30 of 31 311 SUBJECT TO CONTRACT - -------------------------------------------------------------------------------- "TRAFFIC TYPE" a different identifiable type of Call; "TRANSFER CHARGE CALL" a Call for which the Called Party is requested and agrees to pay the cost of a Call from the Calling Party; "VAT" United Kingdom Value Added Tax; "WEEKEND" period of time between 2400 on Friday and 2400 on Sunday or such other period of time as shall be agreed between the Parties; "WORKING DAY" any day other than Saturdays, Sundays, public or bank holidays in the United Kingdom. PAGE 31 of 31 EX-10.48 3 LETTER DATED DECEMBER 23, 1996/ALAN MICHELS 1 EXHIBIT 10.48 STRICTLY PRIVATE & CONFIDENTIAL A Michels Esq Catalina Abbottswood Drive St Georges Hill Weybridge Surrey KT13 LLT Dear Alan I am writing further to our recent meeting in order to set out the Telewest Communications Group Limited ("The Company") proposals on the termination of your employment. These are as follows: (a) You have resigned from your position as a director of Telewest Communications plc, and from your employment and the secondment by and through US West Overseas Operations Inc and any entity affiliated with it ("US West") and any entity affiliated with any of them. (b) It is agreed that your employment by Telewest Communications Group Limited and within the Telewest Group accordingly terminated on 31 July 1996 simultaneous with the termination of your employment by and secondment through US West. You will be paid your salary through the usual channels to that day, and you will be paid in lieu of your pro rata entitlement to accrued untaken holiday (if any). You will not have any entitlement to salary or any other benefits arising after 31 July 1996. Payments made in accordance with this paragraph will be subject to such deductions as the Company is required to make by law. (c) You should submit any expenses claim against any company in the Telewest Group to me by no later than 30 September 1996. The Company will reimburse you expenses incurred by you in the performance of your duties in the usual way. (d) (i) US West will, under the terms of the Secondment Agreement between the Company and US West arrange for you and your family to be repatriated to the destination of your choice in the United States. You will be reimbursed for your reasonable removal and travel costs incurred in connection with you and your family's relocation to the United States. (ii) You will continue to participate in the U S WEST benefits plans in accordance with their terms and as specifically defined in attachment A to this Agreement and nothing in this Agreement shall affect your entitlement to a pension as set out in attachment A. 2 (e) With effect from 31 July 1996 you and your family will no longer enjoy membership of the Company's BUPA medical expenses insurance scheme and you should make your own arrangements from that date. (f) The Company will permit you to exercise any options held by you under (i) the TeleWest 1995 (No. 1) Executive Share Option Scheme ("the No. 1 Scheme") and (ii) the Telewest 1995 (No. 2) Executive Share Option Scheme ("the No. 2 Scheme") at any time between 1 August 1996 and 5 September 1999 for options granted under the No 1 Scheme and at any time between 1 August 1996 and 9 May 1999 for options granted on 9 November 1996 under the No. 2 Scheme and at any time between 1 August 1996 and 5 September 1999 for options granted on 6 March 1996 under the No. 2 Scheme subject always to the Rules of those Schemes. (g) The Company will pay to you (pound)457,000, in compensation for the early termination of your employment. This sum will be paid within fourteen days of the date of this Agreement or by, if later, 7 days after the expiry of the right referred to in paragraph (p) ("the alternative date"). (h) The Company will pay to you by way of further compensation for the termination of your employment any further benefit you would have received if, when your US tax returns for 1996 and UK tax returns for 1996/7 are settled with the relevant taxing authorities, the US West tax equalisation policy would have resulted in your receiving a benefit in excess of (pound)98,646, in which event the Company will pay the excess over (pound)98,646. (i) The Company and you believe that of the payments to be made under paragraph (g) and (h) (if any) above the first(pound)30,000 should be free of income tax and that only 28% of the balance should be subject to income tax in the United Kingdom. However, the Company will withhold 24% of the sums payable under paragraph (g) and (h) above pending the determination of your liability to account for UK Income Tax, and will pay to you any part of that sum for which the Company is not required to account to the Inland Revenue. In the meantime, the Company will not pay any of the monies withheld to the Inland Revenue until requested to do so by yourself or the Inland Revenue. (j) The Company will pay you the sum of (pound)73,353 in consideration of the covenants contained in Clause 13 of the Service Agreement between the Company and you dated 21 November 1994 remaining in full force and effect for a period of 12 months from 31 July 1996. This payment will be subject to deductions for income tax and social security contributions before payment to you. This sum will be paid within fourteen days of the date of this Agreement or by the alternative date if later. (k) You agree to return all books, documents, papers (including copies), material, credit cards, keys or other property of or relating to the business of the Company or any other Company within the Telewest Group of Companies, the US West Group of Companies, and any entity affiliated with any of them (including your company car, keys and related documentation) and any of its or their customers, clients or suppliers to the Company's premises as Genesis Park, Woking, Surrey on or before 31 October 1996. 3 (l) You agree that you will not at any time in the future disclose or communicate to any person or use for your own benefit or the benefit of any other person any confidential information belonging to the Company or any other company in the Telewest Group, US West and any entity affiliated with any of the said corporations which may have come to your knowledge in the course of your employment by the Company provided that this restriction shall cease to apply to any confidential information which enters the public domain other than through your own default. (m) You agree that you will keep confidential the terms of this Agreement and the reason for your departure from the Company, save for such disclosures as have been made or may need to be made to your professional advisers, tax authorities, or members of your immediately family and that you will not at any time in the future say or do anything which might bring the Company into disrepute or damage its reputation, and for its part the Company agrees that it will not do or say anything which might bring you into disrepute or damage your reputation. (n) You agree that you will not, without the prior written consent of the Company (which shall not be unreasonably withheld), sell or otherwise dispose of the shares in the Company which will be transferred to you under the terms of the Company's Restricted Share Scheme at any time before 1 February 1997. (o) These terms are proposed as being in full and final settlement of all and any claims you may have against the Company or any other company within the Telewest Group of Companies, US West or Tele-Communications Inc., and any holding or subsidiary company or affiliated entity of any of them and any of their officers, directors or employees and whether arising in the United Kingdom, the United States of America or in any other jurisdiction relating to your employment by Telewest Communications Group Limited or the holding of any office within the Telewest Group, your employment or secondment by or the holding of any office within US West or any entity affiliated with any of them the termination of your employment or loss of any office or any other matter, including, without limiting the generality of the foregoing, any obligation, demand, cause of action, judgment, controversy or claim of any kind or nature, whether sounding in contract, statute, tort, fraud, misrepresentation, discrimination or any other legal theory, including but not limited to claims under the US WEST Management Separation Plan, Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, as amended, 42 U.S.C. 1981, 1981a, 1983, 1985, or 1988, The Family and Medical Leave Act of 1993, the Americans with Disabilities Act of 1990, as amended, the Fair Labor Standards Act of 1938, as amended, and the Employee's Retirement Income Security Act of 1974, as amended; or any other applicable federal state or local employment related statute or ordinance arising under the laws of the United States or for unfair dismissal under the Employment Protection (Consolidation) Act 1978 or the Race Relations Act 1976. (p) By signing this Agreement, you acknowledge that you have been advised to consult an attorney or lawyer before signing, that you have been provided with a period of at least 21 days in which to consider the terms of this Agreement, that you have been informed you have the right to revoke this Agreement at any time 4 within 7 days after signing it by providing us with written notification, that your signature of this letter has not been procured by any promises or representations from any person or entity other than those expressly stated herein and that you sign this Agreement of your own free will without coercion. (q) The Company will arrange for Arthur Anderson to assist you with the preparation of tax returns relating to the US tax year ending 31 December 1996 and UK tax year ending 5 April 1997. (r) The Company hereby waives and releases you from all and any claims it may have against you relating to your employment, or the performance of your duties for the Company and any company in the TeleWest Group whether as officer or employee of which it has knowledge at the date of this Agreement. (s) (i) Any claim, controversy or dispute between you and US West, to which neither the Company nor any company in the Telewest Group is a party, as defined in paragraph (q) above whenever brought is to be resolved by arbitration in Denver, Colorado. The only legal claims between you and US West that are not included for arbitration within this Agreement are claims for workers' compensation or unemployment compensation benefits. By signing this Agreement, you voluntarily, knowingly and intelligently waive any right you may otherwise have to seek remedies in court or other forums, including the right to a jury trial. The Federal Arbitration Act, 9 USC Sections 1-16 ("FAA") shall govern the arbitrability of all claims, provided that they are enforceable under the FAA, as it may be amended from time to time. In the event the FAA does not govern, the Colorado Uniform Arbitration Act shall apply. This Agreement for arbitration supersedes any other arbitration agreement between you and US West to the extent that they are inconsistent. (ii) A single arbitrator engaged in the practice of law shall conduct any arbitration under clause (s)(i) above under the applicable rules and procedures of the American Arbitration Association ("AAA"). The parties shall select a mutually satisfactory arbitrator. Other than as set forth herein, the arbitrator shall have no authority to add to, detract from, change, amend or modify existing law. All arbitration proceedings, including without limitation, settlements and awards, under this Agreement will be confidential. The parties shall share equally the fees and expenses of the arbitrator. The prevailing party in any arbitration may be entitled to receive reasonable attorney's fees. The arbitrator's decision and award shall be final and binding, as to all claims that were, or would have been, raised in the arbitration, and judgement upon the award rendered by the arbitrator may be entered to any court having jurisdiction thereof. If any party hereto files a judicial or administrative action asserting claims subject to this arbitration provision, and another party successfully stays such action and/or compels arbitration of such claims, the party filling said action shall pay the other party's costs and expenses incurred in seeking such stay and/or compelling arbitration, including reasonable attorney's fees. 5 (iii) Any dispute, difference or question arising out of the terms of this Agreement to which you, US West and TeleWest are a party shall be referred to a single arbitrator for resolution, to be a barrister or solicitor of at least 10 years standing, to be appointed by agreement between the parties or in default of agreement by the President for the time being of the Law Society the arbitrator's decision to be final and binding upon the parties in the absence of manifest error or error of law, subject to the provisions of the Arbitration Act 1950 and 1979. For the avoidance of doubt, I should confirm that the shares allocated to you under the Company's Restricted Share Scheme will vest on 1 January 1997 and, subject to clause (n) above, you will be free to dispose of them. The Company will pay your reasonable legal and accounting costs incurred in connection with this Agreement subject to a maximum amount in aggregate of (pound)10,000 exclusive of VAT and receipt by the Company of invoice(s) in respect of the same addressed to you but expressed to be payable by the Company. No doubt you will wish to consider, and take advice in relation to the terms proposed. Once you have decided if you wish to accept our proposals, please sign and return the copy of this letter enclosed for this purpose. I confirm my agreement to the above. Signed: /s/ Alan Michels dated: 12/23/96 --------------------------- I look forward to hearing from you. Yours sincerely /s/ Cob Stenham - ------------------- For and on behalf of TELEWEST COMMUNICATIONS PLC Signed: /S/ B. M. Maise ------------------------- For and on behalf of US WEST OVERSEAS OPERATIONS INC., 6 ATTACHMENT A As provided in your Assignment Letter, and as calculated by our benefits department, you are entitled to the following pay-outs or other options under the terms of the U S WEST Benefits Plans in which you have participated: 1. PENSION - You are vested in the U S WEST Pension Plan. The Qualified pension benefit on a straight life basis, is $14,231/year payable at age 65. You also are eligible to receive lump sum distributions of your Nonqualified and Mid-Career pension benefits. The Nonqualified lump sum pension benefit is estimated to be $61,293. The Mid-Career lump sum pension benefit is estimated to be $62,770. These lump sum amounts are payable on October 18, 1996 or the next available date after the effective date of this Agreement but must be paid before December 31, 1996. The lump sum distributions are taxable upon distribution and are not eligible to be rolled over into a qualified retirement plan. The Nonqualified and Mid-Career estimates were based on a termination date of July 31st and a discount rate of 4.58%. 2. EXECUTIVE LIFE INSURANCE - Your Basic Executive Life Insurance coverage ended at the end of August, 1996. However, you have several options available regarding the Executive Supplemental Life Insurance. They are as follows: a) If you do not wish to purchase the policy for approximately $28,704, you may return the supplemental policy with no further obligation. You will receive the difference between the purchase price (approximately $28,704) and cash value (approximately $29,684). b) If you wish to purchase the policy under any of the options described below, you will have to pay approximately $28,704 to U S WEST. The options available are: i) maintain the death benefit at $538,000 - This option would require approximate annual premium contributions by you of $3,123/year through 2014 based on current interest and mortality assumption, or ii) decrease the death benefit to $240,000 - This option would require no further premium contributions by you based on current interest and mortality assumptions. YOU MUST NOTIFY U S WEST OF YOUR INTENT UNDER ANY OF THE ABOVE DESCRIBED OPTIONS WITHIN 60 DAYS OF YOUR TERMINATION DATE. U S WEST WILL WAIVE THIS REQUIREMENT UPON YOUR REQUEST. 3. HEALTHCARE - You will receive information on your options to maintain health care coverage under COBRA from COBRAServ. U S WEST will compensate you for twelve months of COBRA payments or will make these payments directly, at its choice. You are responsible to elect COBRA coverage directly, in accordance with the information you will receive from COBRAServ. 4. DISABILITY - Coverage ends on the last day of employment. 5. SAVINGS PLAN - You may either roll your taxable balance over into another plan or leave your balance intact in the Plan. For balance information, you may contact Banker's Trust on 800-729-PLAN (in the US) or 615-835-3700 (international). You will need your PIN number in order to access the system. 7 6. DEFERRED COMPENSATION - You have a balance of $23,005.80 as of 7-15-96. This amount will continue to accrue interest through the payment date. This account will be paid in a lump sum by March 15, 1997, pursuant to the terms of the deferred compensation plan. This amount is not eligible for rollover into a tax qualified retirement plan. 7. STOCK OPTIONS - You have the opportunity to exercise vested stock options pursuant to the terms of your Non-Incentive Stock Option Agreements dated August 7, 1992, December 4, 1992, and October 8, 1993. Your options on 4,500 shares of Media and Communications group stock did not vest before your termination date, and therefore, are forfeited. Our records indicate that, as of September 10, 1996, you had the opportunity to exercise options on 6,000 shares of vested grants in Media group stock. Pursuant to the terms of your Agreements, your options must be exercised within 90 days of your termination date. U S WEST will waive this requirement. YOU WILL BE RESPONSIBLE FOR ANY U.S. TAX OBLIGATIONS YOU INCUR AS A RESULT OF THE ABOVE DESCRIBED BENEFITS. EX-10.51.1 4 ADDENDUM TO THE LETTERS OF UNDERSTANDING 1 EXHIBIT 10.51.1 ADDENDUM TO LETTERS OF UNDERSTANDING This addendum to the letters of understanding regarding International assignment is made by and between US West Overseas Operations, Inc. and Lynn Rexroth and is an addendum to that certain Letter of Understanding reached between the parties and signed by you on December 24, 1992 and the Addendum of January, 1996. The Letters of Understanding are hereby amended as follows: EXTENSION OF AGREEMENT You agree to extend the term of your assignment starting July 1, 1996 to July 1, 1997 understanding that needs of the business may necessitate an additional extension. Any extension would be by mutual agreement between Gary Ames and yourself. You have the right to end or terminate employment at TeleWest, with sixty days notice to the Company, if either of the following occurs: - The Chief Operating Officer's job, or a comparable job within U S West's domestic cable organization, is offered. - Major illness or health problems occur in the immediate family (self, spouse, children, children's spouses, grandchildren). JOB TITLE Your new job title will be Chief Operating Officer. COMPENSATION Your base salary will be increased to 175,000 pounds effective July 1, 1996. A one time retroactive base pay adjustment will be made in the amount of 30,000 pounds. HOME VISITS You and your wife are each entitled to a maximum of four home visits per year (in accordance with your current vacation days), starting from July 1, 1996. These home visits, for the employee, are to be scheduled by mutual agreement with Stephen Davidson and in conjunction with needs of the business. NO CHANGE The remaining terms of the Letters of Understanding between parties continue in full force and effect. 2 /s/ A. Gary Ames - --------------------------------------- A. Gary Ames Board of Directors - TeleWest Communications /s/ Beth M. Moise - ---------------------------------------- Beth M. Moise, Ph.D. Vice President-International Human Resources U S West Overseas Operations, Inc. Representative /s/ Lynn Rexroth - ---------------------------------------- Lynn Rexroth Date: August 28, 1996 ---------------------------------- EX-10.54 5 EMPLOYMENT AGREEMENT:BRUCE LANGHAM 1 Exhibit 10.54 CONFORMED COPY Telewest Communications Group Ltd Statement of Terms and Conditions ______________________________________________________________________________ TELEWEST TELEWEST COMMUNICATIONS GROUP LIMITED STATEMENT OF TERMS AND CONDITIONS Employer: TELEWEST COMMUNICATIONS GROUP LIMITED ("the Company") Genesis Business Park, Albert Drive, Woking, Surrey GU21 5RW Employee: Mr. Bruce D Langham, North Lodge, Coles Lane, Capel, Surrey, RH5 5HS Initial place of employment will be: Genesis Business Park, Albert Drive, Woking, Surrey, GU21 5RW 1. Previous Employment (i) If any terms or conditions of your employment with any previous employer shall for any reason be held to have transferred and apply to your employment by the Company, your consent to the change to the terms and conditions set out in this document which together with the Company Handbook shall govern and regulate your employment by the Company. Your agreement to any changes will be sought at least 12 months before the change becomes effective. (ii) Unless otherwise deemed by law or agreed between you and the Company no period of employment with a previous employer or the Company shall be treated as continuous with any period of employment by the Company. 2. Commencement of Employment Your employment under this contract will commence on 1st April 1996, (and your period of continuous employment for the purposes of the Employment Protection (Consolidation Act 1978 commenced on 28th October 1991. ______________________________________________________________________________ TeleWest Communications Group Ltd Statement of Terms and Conditions 2 3. Position You will be employed as a SVP Operation and additionally you may be required to undertake such other duties as the Company may from time to time request you to perform to meet the needs of the business. In this position you will report to Lynn Rexroth the SVP Group Operation of TeleWest plc. You are required to comply with all the Company's rules, regulations and policies. The Company reserves the right to vary any of these rules, regulations and policies, or to introduce new ones and you will be notified of any such changes. 4. Hours of Work You will be required to work a minimum of 37 1/2 hours per week. Your normal hours of work will be 9:00 am to 5:30 pm Monday to Friday. The Company reserves the right to alter these hours from time to time to meet the needs of the business. At the discretion of the Management you may be required to work outside these normal working hours to meet the Company's requirements. If this is necessary payment will not be made for overtime work. 5. Place of Work As a term of your employment you may be required to work at or from your initial place of employment or any other of the Company's establishments. 6. Payment Your salary will be at the rate of L98,000 per annum, or such other sums as may be notified to you in writing, payable monthly on the 26th day of each month or the closest preceding working day to the 26th day of each month if the 26th falls on a weekend or a Bank Holiday (26 days in arrears, the remainder of the month in advance) net of all standard and agreed deductions. Your salary will be reviewed annually. You agree that during the period of your employment you will maintain a Bank, Building Society or similar account for the purpose of receiving the payment of your wages. The Company operates an annual bonus scheme. Under the terms of the current scheme your bonus opportunity would be 0-25% of salary earned (variable to 50%) payable on performance against budgeted company objectives. _______________________________________________________________________________ TeleWest Communications Group Ltd. Statement of Terms and Conditions 3 The Company reserves the right to deduct from your remuneration, and you agree that the Company will deduct from your remuneration, any monies due to the Company and notified to you, at any time that such debt accrues and for all deductions to be made from the final payment due on the termination of employment. The Company reserves the right to claim any shortfall from you should insufficient monies exist in you final salary. This clause will also apply in cases of overpayment of any remuneration or any other payments (statutory or discretionary) made by error or through any misrepresentation or otherwise by the Company, you or any third party. The Company also reserves the right to withhold payment or deduct from salary a day's pay for each unauthorised day of absence. 7. Expenses The Company will reimburse you for any reasonable expenses properly incurred by you while performing your duties on behalf of the Company, subject to such expenses being within the relevant rules of the Company (as amended from time to time) and to your producing receipts in respect of such expenses when requested to do so by the Company. 8. (a) Holidays The holiday year runs from 1 January to 31 December. Your basic holiday entitlement is 22 working days. Upon reaching three years' continuous service with TeleWest your annual holiday will increase by one day per year of service thereafter up to a maximum of 25 days. If your employment commenced or terminates part way through the holiday year, your entitlement to holidays during that year will be assessed on a pro rata basis. Holidays must be taken at times convenient to the Company and at least 14 days notice of intention to take holiday must be given to your immediate manager. No more that 10 working days holiday may be taken at any one time unless prior permission is given by your immediate manager. In exceptional circumstances unused holiday entitlement up to a maximum of 5 days may be carried over to the next year to be taken during the first three months of the following holiday year provided that prior written permission of your immediate manager is obtained. _______________________________________________________________________________ TeleWest Communications Group Ltd. Statement of Terms and Conditions 4 (b) Holiday Pay Holiday pay is payable at the basic rate. Any excess of holiday taken over earned entitlement will be deducted from your entitlement to final pay on leaving. If this amount is in excess of your final pay, we may still seek to recover this money from you. Payment for any unused entitlement on leaving will be added to your final salary, unless you are dismissed for gross misconduct or leave without giving proper notice when you will forfeit any right to accrued holiday pay. (c) Public Holidays Public Holidays are in addition to annual holiday and are as follows:- Good Friday, Easter Monday, May Day Holiday, Spring Bank Holiday, August Bank Holiday, Christmas Day, Boxing Day, New Year's Day and any other day as decreed by Parliament. 9. Sickness, Absences and Sick Pay The procedure to follow in the event of sickness or injury preventing you from attending work can be found in the Company Handbook. Your entitlement to sick pay is under the Statutory Sick Pay Scheme and the Company's sick pay scheme. Company Sick Pay is based on standard pay inclusive of any Statutory Sick Pay but excluding 'On Target Earnings'. Company Sick Pay ---------------- During Probationary Period No entitlement End of Probationary period 3 weeks (15 days) to one year of continuous service Between 1 and 2 years of continuous 6 weeks (30 days) service Over 2 years of continuous service 13 weeks (65 days) Short-term Disability --------------------- Provides a maximum of 12 weeks of standard pay for employees (excluding 'On Target Earnings') with more than one year's service. This payment is available once Company Sick Pay Entitlement has been exhausted and is at the discretion of the Vice President Human Resources. ______________________________________________________________________ TeleWest Communications Group Ltd Statement of Terms and Conditions 5 Permanent Health Insurance -------------------------- See Appendix D. For further details please refer to the Company Handbook. 10. Maternity/Paternity Provisions Female employees are entitled to maternity leave and pay in accordance with statutory and Company provisions. You are required to inform the Company, as soon as you are in a position to do so, that your pregnancy has been confirmed. Male employees are entitled to two days paid leave, to be taken at the time of your wife or partner having a baby. 11. Grievances and Discipline (i) Grievance Procedure -- If you have a grievance regarding your employment you should, in the first instance, speak to your immediate manager. If the grievance is then not resolved to your satisfaction, you should refer to the grievance procedure which is set out in the Company Handbook. (ii) The disciplinary rules applicable to you are to be found in the Company Handbook. If you are dissatisfied with any disciplinary decision taken in relation to you, you should refer to the disciplinary procedure to be found in the Company Handbook. 12. Performance Appraisal In relation to the performance of your duties, you will be required to participate in an appraisal scheme operated within the Company for employees at your grade or level, subject to any amendments or modifications that may be made to the scheme. For this purpose, participation means being involved in the scheme as an appraisee, or appraiser, or both. Review of salary from time to time will be affected by the outcome of the annual appraisal. Further, annual appraisals may result in disciplinary action, in accordance with normal procedure, where performance is not being achieved. 13. Probationary Period All employment is subject to successful completion of a three month probationary period. At the end of this time your performance in the job will be reviewed. If unsuccessful you will be notified in writing. During your probation you will be required to give and ______________________________________________________________________________ TeleWest Communications Group Ltd Statement of Terms and Conditions 6 are entitled to receive one month's notice of termination. Thereafter notice will be in accordance with the details outlined in the paragraph below. 14. Termination of Employment The Company may terminate your employment by serving notice in writing as follows: Length of Service Length of Notice ----------------- ---------------- During probationary period 1 month Following probationary period 12 months If you wish to terminate your employment during your probationary period you must give the company one month's written notice of termination to your immediate manager or your Human Resources Manager. Following completion of your probationary period you must give 12 months written notice of termination to your immediate manager or your Human Resources Manager. The Company reserves the right to terminate your employment without notice in case of gross misconduct and after a full investigation has taken place. The Company may, with reasonable cause, suspend you from your employment on full basic salary (excluding "On Target Earnings") at any time. On termination of your employment you are required immediately to surrender to the Company in accordance with its instructions all books, documents, papers, reports and copies thereof and all other property belonging to the Company or associated Company or relating to its business affairs or dealings which are in your possession or under your control, including any car, portable computer, and mobile phone or pager provided with your employment. You may be required, during any period of notice of termination given either by yourself or the Company, at the request of the Company, to take leave during which you will be entitled to normal remuneration benefits. You will not be required to attend at work, nor to carry out any of your duties, but you will be required to ensure that you are available at all times during that period at the request of the Company. You will, during this period, not be entitled to access to the Company's premises without prior permission from your manager. You will be required to immediately return all Company documentation and other materials to your possession. _______________________________________________________________________________ TeleWest Communications Group Ltd Statement of Terms and Conditions 7 15. Collective Agreement There is no collective agreement in force which directly affects the terms and conditions of your employment. 16. Employment outside the United Kingdom There are no particulars to be given to you relating to employment outside the United Kingdom. 17. Pension Scheme The Company operates a contributory pension scheme which you will be eligible to join after you have been with the Company for nine months. For further details please refer to Appendix D (attached) or the Company Handbook. 18. Other Benefits You will be entitled to Company benefits as set out in Appendix D. 19. Company Car As stated in your offer letter you may be provided with a Company vehicle of a size and make which the Company considers appropriate or a cash allowance in lieu of the Company vehicle as set out in Appendix E. 20. Fidelity The contractual relationship between the Company and its employees is founded on trust. Any breach of this trust by am employee, such as the unauthorised disclosure to a third party of confidential information about matters connected with the business, will render an employee liable to disciplinary action, and/or to civil proceedings to restrain the employee from disclosing the information to a third party, or from making personal use of it without authority from a Senior Manager/Director, or for damages if loss to the company results from an unauthorised disclosure. This restriction shall continue to apply after the termination of your employment without limitation in time, but shall cease to apply to any information or knowledge which may subsequently come into the public domain other than by way of unauthorised disclosure. _______________________________________________________________________________ TeleWest Communications Group Ltd Statement of Terms and Conditions 8 All records, documents, other papers, and computer data (together with any copies or extracts thereof), made or acquired by you in the course of your employment shall be the property of the Company and must be returned on the termination of your employment. The copyright in all such records, documents and papers shall be at all times belong to the Company. 21. Exclusivity of Service You are required to devote your full-time attention and abilities to your job during working hours, and to act in the best interests of the company at all times. You must not, without the written consent of the Company, be in any way directly or indirectly engaged or concerned with any other business or undertaking where this is likely to be in conflict with the interests of the Company. However, this does not preclude your holding no more than 5% of equity in any company which is quoted on a recognised Stock Exchange. 22. Non-Competition You agree that you will not: (a) for a period of six months from the termination of your employment, however that occurs, solicit business or in any way deal on behalf of yourself or for any other person or entity, from customers/clients of the Company with whom you have had any dealings or involvement with for six months prior to the termination of your employment, however that occurs. (b) for a period of six months after the termination of your employment, however that occurs, solicit the Company's employees for their employment elsewhere. At any time after the termination of your employment, however that occurs, represent yourself as being in any way connected with or interest in the business of the Company, or use, for any purpose whatsoever, the name (or logo) of the Company. You agree that if any of these restrictions are considered void, because they go beyond what is reasonable in all the circumstances for the protection of the legitimate interests of _______________________________________________________________________________ TeleWest Communications Group Ltd. Statement of Terms and Conditions 9 the Company, that such restriction will apply with modification as may be necessary to make it valid and effective. 23. Waiver of Rights If this Agreement is terminated by either party and you are offered re-employment by the Company or employment by an Associated Company on terms not less favourable in all material respects than the terms of this Agreement, you shall have no claim against the Company in respect of that termination provided that such re-employment will not break your continuous period of employment. 24. Definition of Associated Company In this Agreement an "Associated Company" includes any firm, company, corporation or other organisation which: 24.1 is directly or indirectly controlled by the Company; or 24.2 directly or indirectly controls the Company; or 24.3 is directly or indirectly controlled by a third party who directly or indirectly controls the Company. 25. Duty of Report It is expected that you will act with due diligence and utmost honesty at all times. The Company sees it as your duty to report any acts of misconduct, dishonesty, breach of Company rules committed, contemplated, or discussed by another member of staff or any other third party. A failure to do so on your part may be regarded as serious and could lead to your dismissal. 26. Changes of Terms and Conditions of Employment From time to time variations in your Terms and Conditions of employment may result and any changes will be notified to you in a statement of variation to your original Statement of Terms and Conditions. Your agreement to any change will be sought at least 12 months before the change becomes effective. You will be notified of any such change and it will be considered to have been accepted by you if you continue to work in accordance with the change in terms for a period of one month. ______________________________________________________________________________ TeleWest Communications Group Ltd Statement of Terms and Conditions 10 ANY PREVIOUS CONTRACT OF EMPLOYMENT BETWEEN THE COMPANY AND THE EMPLOYEE IS HEREBY SUPERSEDED. Signed on behalf of the Company /s/ L Rexroth Date January 30, 1996 (Lynn Rexroth, SVP Group Operations) I hereby acknowledge that I accept the Terms and Conditions of Employment as stated above, and that I have received a written statement of them. Signed by the employee /s/ Bruce Langham Date February 16, 1996 ______________________________________________________________________________ TeleWest Communications Group Ltd Statement of Terms and Conditions EX-10.55 6 LETTER AGREEMENT: BRUCE LANGHAM DATED SEP. 30, 96 1 Exhibit 10.55 CONFORMED COPY TELEWEST COMMUNICATIONS Stephen Davidson Chief Executive Officer 30 September 1996 Telewest Communications Genesis Business Park, Albert Drive, Woking, Surrey GU2I 5RW Bruce Langham Tel: (01483) 750900 Fax: (01483) 750901 Telewest Communications Dear Bruce, CHANGE OF RESPONSIBILITIES ______________________________________________________________________________ I am delighted that you have accepted the position of Senior Vice President Digital Services commencing on 16th September 1996. In this position you will report to me. Your terms and conditions of employment with Telewest Communications Group Limited remain unchanged. However, should you decide over the next twelve months to resign your position, you will be entitled to a termination package equivalent to that available for redundancy. This termination package would include: * 12 months' salary in lieu of notice * 12 months' short term incentive plan bonus payable at the target rate, ie 25% * full entitlement to shares under the Restricted Share Scheme up to 31 December 1997, or if this is not approved by the Trustees a cash equivalent will be paid to you * entitlement to exercise executive share options within 12 months' of leaving Telewest's employment, 42 months after the date of grant or 42 months after the last date prior to cessation of employment on which you exercised an option, whichever shall be the latest * recompense for Company pension contributions, medical insurance, car and fuel equivalent to one year's benefit Please sign and return one copy of this letter to me to indicate your acceptance. Yours sincerely, /s/ SJ Davidson ________________________________________________________________________________ I accept the terms and conditions outlined in this letter. Signed: /s/ Bruce Langham Date: September 30, 1996 (Bruce Langham) EX-10.56 7 NON-EXECUTIVE DIRECTORS APPOINTMENT LETTER 1 EXHIBIT 10.56 UNIT 1, GENESIS BUSINESS PARK ALBERT DRIVE SHEERWATER WOKING SURREY GU21 5RW Date: 1 August 1995 TELEWEST PLC NON-EXECUTIVE DIRECTORS APPOINTMENT LETTER Dear Mr Stenham As you are aware, it is now anticipated that the merger of TeleWest Communications plc and SBCC Cablecomms (UK) will proceed later this year. As you know, the merger will be effected through the formation of a new company TeleWest plc ("the Company"), which will acquire both TeleWest Communications plc and SBCC CableComms U.K. When that process is completed, we would very much like you to serve as a Non-Executive Director of the Company. Of course, at that stage there would be little point in your continuing as a Non-Executive Director of TeleWest Communications plc. I attach a letter of resignation you could use for that purpose, I should be grateful if you could sign that letter and return it to Victoria Hull. If you are willing to accept the appointment as a Non-Executive Director of the Company, the terms which would apply to you are set out below. You will see that they are identical to those which currently apply between you and TeleWest Communications plc. For confirmation, you should note that your resignation as a director of TeleWest Communications plc and appointment as a Non-Executive Director of the Company will take effect upon the shares of the Company being admitted to the Official List of The London Stock Exchange. 1. As a Non-Executive Director you will be expected to attend board meetings, the annual general meeting of the Company and any extra-ordinary general meetings of the Company which may be called. It is anticipated that board meetings will be held quarterly, although on occasion it may be necessary to call board meetings on short 1 2 notice. You will receive details of board meetings in advance for your diary, and an agenda will normally be circulated a few days before each meeting. The audit and remuneration committees will be as presently constituted, save in respect of the participation of a representative of SBC and Cox instead of TCI on the Audit Committee. We should be pleased if you would continue in your currrent capacity on those committees. 2. As you know, your appointment and re-appointment as a Non-Executive Director has to be ratified each year by the shareholders of the Company, as required by the Articles of Association. Subject to this, we anticipate your appointment will expire at the same time as your original appointment with TeleWest Communications plc, that is November 1997, but which may be renewed for a further three years if both you and the board agree. 3. Whilst I am sure you do not need me to remind you of your responsibilities as a Non-Executive Director of the Company, I would wish to make clear that you will be under an obligation to communicate to the board any conflicts which may arise during the period when you serve as a Non-Executive Director. The board will then be able to decide what (if any) action needs to be taken about that. In addition, it is of great importance that you do not disclose to anybody outside the Company or any of its subsidiaries any trade secrets or other confidential information concerning the Company or any of its subsidiaries which may come to your knowledge by virtue of your position as a Non-Executive Director. During your appointment as a Non-Executive Director the board would expect you to refrain from accepting appointments (whether as agent, employee or consultant) with any company or firm engaged in a business competing with or similar to that of the Company or any of its subsidiaries. 4. We are also obliged to require that, upon the Company's shares being admitted to listing on the London Stock Exchange, you comply with the "Model Code" issued by the International Stock Exchange of Great Britain and the Republic or Ireland in relation to dealings in shares by you and anybody connected with you. We anticipate that the Company will adopt its own share dealing code in similar terms to the "Model Code" of the London Stock Exchange shortly. 5. The Rules of the London Stock Exchange also require us to submit to the Securities and Futures Authority Limited a "declaration of a directors business activities" in the form set out in Schedule 7 to the Listing Rules of the London Stock Exchange. By accepting this appointment you undertake to complete such a declaration and authorise the Company to submit it to the Securities and Futures Authority Limited. In addition, you agree that you will notify the Company as soon as practicable of any changes to the details set out in the declaration. 6. For serving as a Non-Executive Director of the Company, you will be entitled to receive a fee, presently (pound) 35,000 per annum payable quarterly in arrears. The level of Non-Executive Directors fees is reviewed annually. You also receive (pound)1,000 for 2 3 every board meeting of the Company you attend. In addition, the Company will of course reimburse you for any expenses you might incur in the performance of your duties, these can include reasonable travel and other identical expenses which you might incur. I would wish to make clear that such expenses may include legal fees if circumstances should arise in which it is necessary for you to seek separate legal advice about the performance of your duties. This could, of course, be a little awkward and in that situation you might find it helpful to discuss the issue either with me or one of your Non-Executive colleagues in advance should you think it appropriate. I hope that you find the above terms are in order. I should be grateful if you will confirm your agreement to them by signing and returning to me the enclosed counter part of this letter. Yours sincerely /s/ Alan Michels - ----------------------- ALAN MICHELS CHIEF EXECUTIVE OFFICER 3 EX-10.57 8 NON-EXECUTIVE DIRECTORS APPOINTMENT LETTER 1 EXHIBIT 10.57 UNIT 1, GENESIS BUSINESS PARK ALBERT DRIVE SHEERWATER WOKING SURREY GU21 5RW Date: 1 August 1995 TELEWEST PLC NON-EXECUTIVE DIRECTORS APPOINTMENT LETTER Dear Sir Gordon As you are aware, it is now anticipated that the merger of TeleWest Communications plc and SBCC Cablecomms (UK) will proceed later this year. As you know, the merger will be effected through the formation of a new company TeleWest plc ("the Company"), which will acquire both TeleWest Communications plc and SBCC CableComms U.K. When that process is completed, we would very much like you to serve as a Non-Executive Director of the Company. Of course, at that stage there would be little point in your continuing as a Non-Executive Director of TeleWest Communications plc. I attach a letter of resignation you could use for that purpose, I should be grateful if you could sign that letter and return it to Victoria Hull. If you are willing to accept the appointment as a Non-Executive Director of the Company, the terms which would apply to you are set out below. You will see that they are identical to those which currently apply between you and TeleWest Communications plc. For confirmation, you should note that your resignation as a director of TeleWest Communications plc and appointment as a Non-Executive Director of the Company will take effect upon the shares of the Company being admitted to the Official List of The London Stock Exchange. 1. As a Non-Executive Director you will be expected to attend board meetings, the annual general meeting of the Company and any extra-ordinary general meetings of 1 2 the Company which may be called. It is anticipated that board meetings will be held quarterly, although on occasion it may be necessary to call board meetings on short notice. You will receive details of board meetings in advance for your diary, and an agenda will normally be circulated a few days before each meeting. The audit committee will be as presently constituted, save in respect of the participation of a representative of SBC and Cox instead of TCI. We should be pleased if you would continue in your currrent capacity on this committee. 2. As you know, your appointment and re-appointment as a Non-Executive Director has to be ratified each year by the shareholders of the Company, as required by the Articles of Association. Subject to this, we anticipate your appointment will expire at the same time as your original appointment with TeleWest Communications plc, that is November 1997, but which may be renewed for a further three years if both you and the board agree. 3. Whilst I am sure you do not need me to remind you of your responsibilities as a Non-Executive Director of the Company, I would wish to make clear that you will be under an obligation to communicate to the board any conflicts which may arise during the period when you serve as a Non-Executive Director. The board will then be able to decide what (if any) action needs to be taken about that. In addition, it is of great importance that you do not disclose to anybody outside the Company or any of its subsidiaries any trade secrets or other confidential information concerning the Company or any of its subsidiaries which may come to your knowledge by virtue of your position as a Non-Executive Director. During your appointment as a Non-Executive Director the board would expect you to refrain from accepting appointments (whether as agent, employee or consultant) with any company or firm engaged in a business competing with or similar to that of the Company or any of its subsidiaries. 4. We are also obliged to require that, upon the Company's shares being admitted to listing on the London Stock Exchange, you comply with the "Model Code" issued by the International Stock Exchange of Great Britain and the Republic or Ireland in relation to dealings in shares by you and anybody connected with you. We anticipate that the Company will adopt its own share dealing code in similar terms to the "Model Code" of the London Stock Exchange shortly. 5. The Rules of the London Stock Exchange also require us to submit to the Securities and Futures Authority Limited a "declaration of a directors business activities" in the form set out in Schedule 7 to the Listing Rules of the London Stock Exchange. By accepting this appointment you undertake to complete such a declaration and authorise the Company to submit it to the Securities and Futures Authority Limited. In addition, you agree that you will notify the Company as soon as practicable of any changes to the details set out in the declaration. 6. For serving as a Non-Executive Director of the Company, you will be entitled to receive a fee, presently (pound) 20,000 per annum payable quarterly in arrears. The level of 2 3 Non-Executive Directors fees is reviewed annually. You also receive (pound) 1,000 for every board meeting of the Company you attend. In addition, the Company will of course reimburse you for any expenses you might incur in the performance of your duties, these can include reasonable travel and other identical expenses which you might incur. I would wish to make clear that such expenses may include legal fees if circumstances should arise in which it is necessary for you to seek separate legal advice about the performance of your duties. This could, of course, be a little awkward and in that situation you might find it helpful to discuss the issue either with me or one of your Non-Executive colleagues in advance should you think it appropriate. I hope that you find the above terms are in order. I should be grateful if you will confirm your agreement to them by signing and returning to me the enclosed counter part of this letter. Yours sincerely /s/ Alan Michels - ----------------------- ALAN MICHELS CHIEF EXECUTIVE OFFICER 3 EX-10.58 9 NON-EXECUTIVE DIRECTORS APPOINTMENT LETTER 1 EXHIBIT 10.58 UNIT 1, GENESIS BUSINESS PARK ALBERT DRIVE SHEERWATER WOKING SURREY GU21 5RW Date: 1 August 1995 TELEWEST PLC NON-EXECUTIVE DIRECTORS APPOINTMENT LETTER Dear Lord Griffiths As you are aware, it is now anticipated that the merger of TeleWest Communications plc and SBCC Cablecomms (UK) will proceed later this year. As you know, the merger will be effected through the formation of a new company TeleWest plc ("the Company"), which will acquire both TeleWest Communications plc and SBCC CableComms U.K. When that process is completed, we would very much like you to serve as a Non-Executive Director of the Company. Of course, at that stage there would be little point in your continuing as a Non-Executive Director of TeleWest Communications plc. I attach a letter of resignation you could use for that purpose, I should be grateful if you could sign that letter and return it to Victoria Hull. If you are willing to accept the appointment as a Non-Executive Director of the Company, the terms which would apply to you are set out below. You will see that they are identical to those which currently apply between you and TeleWest Communications plc. For confirmation, you should note that your resignation as a director of TeleWest Communications plc and appointment as a Non-Executive Director of the Company will take effect upon the shares of the Company being admitted to the Official List of The London Stock Exchange. 1. As a Non-Executive Director you will be expected to attend board meetings, the annual general meeting of the Company and any extra-ordinary general meetings of 1 2 the Company which may be called. It is anticipated that board meetings will be held quarterly, although on occasion it may be necessary to call board meetings on short notice. You will receive details of board meetings in advance for your diary, and an agenda will normally be circulated a few days before each meeting. The audit committee will be as presently constituted, save in respect of the participation of a representative of SBC and Cox instead of TCI. We should be pleased if you would continue in your currrent capacity on this committee. 2. As you know, your appointment and re-appointment as a Non-Executive Director has to be ratified each year by the shareholders of the Company, as required by the Articles of Association. Subject to this, we anticipate your appointment will expire at the same time as your original appointment with TeleWest Communications plc, that is November 1997, but which may be renewed for a further three years if both you and the board agree. 3. Whilst I am sure you do not need me to remind you of your responsibilities as a Non-Executive Director of the Company, I would wish to make clear that you will be under an obligation to communicate to the board any conflicts which may arise during the period when you serve as a Non-Executive Director. The board will then be able to decide what (if any) action needs to be taken about that. In addition, it is of great importance that you do not disclose to anybody outside the Company or any of its subsidiaries any trade secrets or other confidential information concerning the Company or any of its subsidiaries which may come to your knowledge by virtue of your position as a Non-Executive Director. During your appointment as a Non-Executive Director the board would expect you to refrain from accepting appointments (whether as agent, employee or consultant) with any company or firm engaged in a business competing with or similar to that of the Company or any of its subsidiaries. 4. We are also obliged to require that, upon the Company's shares being admitted to listing on the London Stock Exchange, you comply with the "Model Code" issued by the International Stock Exchange of Great Britain and the Republic or Ireland in relation to dealings in shares by you and anybody connected with you. We anticipate that the Company will adopt its own share dealing code in similar terms to the "Model Code" of the London Stock Exchange shortly. 5. The Rules of the London Stock Exchange also require us to submit to the Securities and Futures Authority Limited a "declaration of a directors business activities" in the form set out in Schedule 7 to the Listing Rules of the London Stock Exchange. By accepting this appointment you undertake to complete such a declaration and authorise the Company to submit it to the Securities and Futures Authority Limited. In addition, you agree that you will notify the Company as soon as practicable of any changes to the details set out in the declaration. 6. For serving as a Non-Executive Director of the Company, you will be entitled to receive a fee, presently (pound) 20,000 per annum payable quarterly in arrears. The level of 2 3 Non-Executive Directors fees is reviewed annually. You also receive (pound) 1,000 for every board meeting of the Company you attend. In addition, the Company will of course reimburse you for any expenses you might incur in the performance of your duties, these can include reasonable travel and other identical expenses which you might incur. I would wish to make clear that such expenses may include legal fees if circumstances should arise in which it is necessary for you to seek separate legal advice about the performance of your duties. This could, of course, be a little awkward and in that situation you might find it helpful to discuss the issue either with me or one of your Non-Executive colleagues in advance should you think it appropriate. I hope that you find the above terms are in order. I should be grateful if you will confirm your agreement to them by signing and returning to me the enclosed counter part of this letter. Yours sincerely /s/ Alan Michels - ---------------------- ALAN MICHELS CHIEF EXECUTIVE OFFICER 3 EX-13 10 1996 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT 13 24 o TELEWEST COMMUNICATIONS plc FINANCIAL REVIEW [THE FOLLOWING TABLES WERE REPRESENTED BY 2 BAR CHARTS IN THE PRINTED MATERIAL.] 1993 40,338 TOTAL 1994 72,027 REVENUE 1995 144,784 (pound)000 1996 290,266 GROSS PROFIT: (revenue less 1993 1994 1995 1996 direct costs) ---- ---- ---- ---- 54% 58% 57% 58% gross profit ((pound)) 21,732 41,813 83,064 167,788 gross margin (%) (gross profit divided by revenue) - -------------------------------------------------------------------------------- To comply with applicable UK and US securities regulations, Telewest Communications plc prepares financial statements under UK and US generally accepted accounting principles ("GAAP") both of which are included in this report. Financial statements prepared under UK GAAP can be found on pages 48 to 66; financial statements prepared under US GAAP can be found on pages 67 to 87. The acquisition of SBCC on 3 October 1995 has been accounted for in the 1995 consolidated financial statements under the acquisition method of accounting. Therefore the 1995 consolidated profit and loss account includes the results of SBCC from 3 October 1995 to 31 December 1995. The 1996 consolidated profit and loss account includes the results of SBCC for the full year. In the discussion of the financial results that follows, unless specifically noted, all references to figures are identical under UK and US GAAP. SUMMARY OF OPERATIONS YEARS ENDED 31 DECEMBER 1996 AND 1995. The Group's consolidated revenue increased by (pound)145.5 million or 100% from (pound)144.8 million in 1995 to (pound)290.3 million in 1996. The increase was attributable to the inclusion of the results of the former SBCC franchises for a full year in 1996 and to the larger customer base created by the enlarged Group's continuing network construction. Cable television revenue Cable television revenue increased by 87% from (pound)64.7 million in 1995 to (pound)121.2 million in 1996. The increase was primarily attributable to a 74% increase (from 253,049 to 440,212) in the average number of customers in 1996 over 1995. The increase in the average number of customers results from the inclusion for a full year in 1996 of the results of the former SBCC franchises (which contributed an average of 165,855 customers in 1996 compared to an average of 35,192 customers in 1995) and from an increase in the number of homes passed and marketed in the other 2 25 o TELEWEST COMMUNICATIONS plc [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] North East 49% HOMES PASSED AND ---------------------------------- PERCENTAGE COMPLETED South East 37% ---------------------------------- 1996 build South West 71% ---------------------------------- London South 90% ---------------------------------- Midlands 67% ---------------------------------- Scotland 78% ---------------------------------- North West 68% ---------------------------------- Telewest overall 65% - --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL HIGHLIGHTS (all amounts in (pound)million) UK GAAP US GAAP ---------------------------------------------- --------------------------------------------- Year ended 31 December 1996 1995 1995 1994 1993 1996 1995 1995 1994 1993 Pro forma Predecessor Pro forma REVENUE Note Businesses - ------------------------------------------------------------------------------------------------------------------------------------ Cable television 121.2 64.7 83.7 35.9 20.7 121.2 64.7 83.7 35.9 20.7 Telephony - residential 125.0 57.6 81.2 23.5 11.3 125.0 57.6 81.2 23.5 11.3 Telephony - business 34.6 17.4 20.6 8.8 4.9 34.6 17.4 20.6 8.8 4.9 Other 9.5 5.1 5.7 3.8 3.4 9.5 5.1 5.7 3.8 3.4 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue 290.3 144.8 191.2 72.0 40.3 290.3 144.8 191.2 72.0 40.3 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING COSTS AND EXPENSES Programming (69.9) (32.2) (42.9) (15.5) (8.4) (69.9) (32.2) (42.9) (15.5) (8.4) Telephony (52.7) (29.5) (38.7) (14.7) (10.2) (52.7) (29.5) (38.7) (14.7) (10.2) Selling, general and administrative (167.3) (105.4) (137.8) (60.4) (32.5) (167.3) (105.4) (137.8) (60.4) (32.5) Depreciation (129.7) (61.5) (82.3) (30.3) (17.6) (129.7) (60.0) (80.8) (30.3) (17.6) Amortisation 1 - - - - - (26.1) (7.9) (25.3) (1.8) (0.8) - ------------------------------------------------------------------------------------------------------------------------------------ (419.6) (228.6) (301.7) (120.9) (68.7) (445.7) (235.0) (325.5) (122.7) (69.5) - ------------------------------------------------------------------------------------------------------------------------------------ Operating loss (129.3) (83.8) (110.5) (48.9) (28.4) (155.4) (90.2) (134.3) (50.7) (29.2) OTHER INCOME (EXPENSE) Share of loss of affiliates (15.2) (12.1) (12.1) (8.5) (7.5) (16.0) (12.8) (12.8) (8.5) (7.5) Financial expenses, net 2 (105.4) (18.8) (25.3) (7.8) (0.7) (90.8) (34.6) (41.1) (6.2) (0.7) Other (1.0) (0.7) (0.7) - - (0.2) 0.1 0.1 - - - ------------------------------------------------------------------------------------------------------------------------------------ Net loss before extraordinary item (250.9) (115.4) (148.6) (65.2) (36.6) (262.4) (137.5) (188.1) (65.4) (37.4) Extraordinary item 3 - - - - - - - - 7.3 - - ------------------------------------------------------------------------------------------------------------------------------------ Net loss (250.9) (115.4) (148.6) (65.2) (36.6) (262.4) (137.5) (188.1) (58.1) (37.4) ====================================================================================================================================
Note 1 Under UK GAAP goodwill related to acquisitions is written off to reserves at time of purchase. Under US GAAP goodwill is generally amortised over 20 years. Note 2 The accounting treatment for financial instruments is different under UK and US GAAP, as explained in the financial statements. Note 3 Amount represents the unrealised gain embedded in interest rate swaps which were marked to market for US GAAP purposes but not for UK GAAP purposes. Pro forma information has been included for 1995 to demonstrate the effect of including the results of former SBCC franchises for the full year ended 31 December 1995. The pro forma information is not commented upon in the Financial Review. For the purposes of comparison, UK GAAP consolidated financial highlights for 1994 and 1993 are shown to reflect the results of certain predecessor businesses which were acquired by the Group in November 1994. The results of predecessor businesses do not include the results of former SBCC franchises. 3 26 o TELEWEST COMMUNICATIONS plc [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] GROSS PROFIT: RESIDENTIAL TELEVISION (revenue less program- 1993 1994 1995 1996 ming expense) ---- ---- ---- ---- 59% 57% 50% 42% gross profit ((pound)) 12,326 20,375 32,546 51,318 gross margin (%) (gross profit divided by revenue) - -------------------------------------------------------------------------------- franchises (from 1,142,860 at 31 December 1995 to 1,460,463 at 31 December 1996). Average monthly revenue per cable television customer increased 8% from (pound)21.32 in 1995 to (pound)22.95 in 1996. This was a result of an increase in the basic channel charge implemented in December 1995 and the additional revenue generated from pay-per-view programming. This was, however, partially offset by a decrease in the average number of premium channels purchased per customer due to the inclusion for a full year in 1996 of the results of the former SBCC franchises which historically have had a lower average number of premium channels purchased per customer. Telephony revenue Telephony revenue increased by 113% from (pound)75.0 million in 1995 to (pound)159.6 million in 1996. Residential telephony revenue increased by 117% from (pound)57.6 million in 1995 to (pound)125.0 million in 1996. Business telephony revenue increased by 98% from (pound)17.4 million in 1995 to (pound)34.6 million in 1996. The increase in residential telephony in 1996 over 1995 was primarily due to a 119% increase (from 234,400 to 514,156) in the average number of residential lines. This increase resulted from the inclusion for a full year in 1996 of the results of the former SBCC franchises (which contributed an average of 229,751 lines in 1996 compared to an average of 45,117 lines in 1995), and from an increase in the number of homes passed and marketed in the other franchises (from 968,863 at 31 December 1995 to 1,380,484 at 31 December 1996). The revenue increase from the growth in the average number of residential lines was slightly offset by a 1% decrease in the average monthly revenue per residential line, from (pound)20.48 in 1995 to (pound)20.26 in 1996. This decrease was mainly attributable to price reductions in per minute call charges in response to price cutting by BT, the Group's main competitor in residential telephony, which were offset by increases in line rental rates. The Group intends to continue to reduce per minute call tariffs as necessary to compete effectively and to seek to mitigate the revenue impact of these reductions through higher line rentals and increased call volumes resulting from increased marketing. The increase in business telephony revenue in 1996 over 1995 was primarily attributable to a 114% increase (from 24,681 to 52,849) in the average number of business telephony lines in 1996, which was partially offset by an 8% decrease in the average monthly revenue per business line, from (pound)58.92 in 1995 to (pound)54.50 in 1996. This decrease was attributable to price reductions in per minute call charges in response to competition and increased sales of Centrex, a new business telecommunications product which provides more lines to customers but has a lower average monthly revenue per line. Other revenue increased by 89% from (pound)5.0 million in 1995 to (pound)9.5 million in 1996. Other revenue is derived primarily from management services provided to Affiliated Companies, cable publications and network management services provided to other operators, and advertising sales. Operating costs and expenses The Group's consolidated operating costs and expenses (which include direct costs of programming and interconnection; selling, general and administrative expenses; depreciation expense and amortisation expense) increased by 84% from (pound)228.6 million in 1995 to (pound)419.6 million in 1996. (90% under US GAAP from (pound)235.0 million in 1995 to (pound)445.7 million in 1996.) Programming fees are the largest component of the Group's operating costs in providing cable television services. The Group obtains most of its programming under contracts which provide for payments based upon the number of customers. 4 27 o TELEWEST COMMUNICATIONS plc [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] GROSS PROFIT: COMBINED TELEPHONY (revenue less 1993 1994 1995 1996 telephony expenses) ---- ---- ---- ---- 37% 54% 61% 67% gross profit ((pound)) 5,966 17,5569 45,520 107,003 gross margin (%) (gross profit divided by revenue) - -------------------------------------------------------------------------------- As a percentage of cable television revenues, programming costs increased from 50% in 1995 to 58% in 1996 as a result of programming fee increases, providing more channels in the basic cable television package with no price increase and the inclusion for a full year in 1996 of the results of the former SBCC franchises which have higher per channel programming costs. Interconnection charges are the largest component of the Group's telephony operating costs in providing telephony services. As a percentage of telephony revenue, telephony operating costs decreased from 39% in 1995 to 33% in 1996 as line rental income, which incurs no third party cost, represented a larger proportion of total average revenue per line in 1996 than in 1995. Interconnection charges in 1996 also were reduced by credits relating to interconnection charges from earlier periods which have been calculated based on revised estimates of prevailing interconnection charges in the UK. Selling, general and administrative expenses, which include, among other items, salary and marketing costs, decreased as a percentage of revenue from 73% in 1995 to 58% in 1996. The majority of this improvement is due to the rapid growth in revenues and continued reduction in support costs per customer, with the balance - accounting for 5 percentage points of the year-on-year reduction - due to revised estimates used in determining the proportion of labour and overhead costs which are capitalised as network assets. The Group expects that selling, general and administrative expenses will continue to decline as a percentage of revenue as revenues increase and the efficiency gains of its fixed cost base are increasingly exploited. Total labour and overhead costs capitalised in 1996 were (pound)54.0 million, compared to (pound)26.6 million in 1995. Depreciation expense increased 111% from (pound)61.5 million in 1995 to (pound)129.7 million in 1996 under UK GAAP and increased 116% from (pound)60 million under US GAAP. This increase was principally attributable to capital expenditure associated with the Group's continuing construction activities, a full year of depreciation expense recorded in the former SBCC franchises, and a reduction in the estimated useful lives of certain network assets in 1996 as set out in Note 1 to the UK GAAP financial statements and Note 3 to the US GAAP financial statements. Under US GAAP, amortisation expense increased from (pound)7.9 million in 1995 to (pound)26.1 million in 1996 primarily due to a full year of amortisation of the goodwill arising on the acquisition of SBCC in October 1995. Under UK GAAP, all goodwill arising on acquisitions is directly written off to reserves. Other income (expense) The Group's share of the net losses of its Affiliated Companies accounted for under the equity method, principally Birmingham Cable Corporation Limited and Cable London plc, was (pound)15.2 million and (pound)12.1 million in 1996 and 1995, respectively, under UK GAAP. ((pound)16.0 million and (pound)12.8 million in 1996 and 1995, respectively, under US GAAP due to a difference in the classification of tax expense.) Financial expenses, net, under UK GAAP consist primarily of interest expense of (pound)96.8 million in 1996 ((pound)23.8 million in 1995), and foreign exchange losses of (pound)25.9 million in 1996 ((pound)4.7 million in 1995) offset in part by interest income earned on short-term investments and loans to Affiliated Companies of (pound)17.2 million in 1996 ((pound)15.6 million in 1995). Under US GAAP, financial expenses consist primarily of interest expense of (pound)105.2 million in 1996 ((pound)26.6 million in 1995), and foreign exchange losses of (pound)2.8 million in 1996 ((pound)14.6 million in 1995) offset in part by interest income earned on short-term investments and loans to Affiliated Companies of (pound)16.7 million in 1996 ((pound)15.6 million in 1995). In 1995, financial expenses under UK GAAP also included 5 28 o TELEWEST COMMUNICATIONS plc - -------------------------------------------------------------------------------- an accounting loss on the sale of interest rate swaps of (pound)5.5 million ((pound)8.6 million under US GAAP). Interest expense increased by (pound)73.0 million in 1996 ((pound)78.6 million under US GAAP) primarily as a result of the interest payments and accrued interest expense on the Senior Debentures and the Senior Discount Debentures, issued by the Group in October 1995; the debentures are more fully described in the following discussion on Liquidity and Capital Resources. The foreign exchange losses under UK GAAP in 1996 primarily relate to the amortisation of the foreign currency option premium which hedges the Senior Discount Debentures and the amortisation of exchange losses arising on the translation of the debentures to Sterling using the contracted exchange rate of the option. It is the Group's policy to hedge non-Sterling denominated borrowings to reduce or eliminate exchange rate exposure. The foreign exchange losses under US GAAP in 1996 arose principally from the re-translation of the US Dollar denominated debentures to Pounds Sterling using the 31 December 1996 exchange rate and marking the associated hedging instruments to their market value at 31 December 1996. SUMMARY OF OPERATIONS YEARS ENDED 31 DECEMBER 1994 AND 1995 The Group's consolidated revenue increased from (pound)72.0 million in 1994 to (pound)144.8 million in 1995 as a result of the larger customer base created through both the Group's continuing network construction and the inclusion of the results of the former SBCC franchises from their acquisition date on 3 October 1995. Revenue Cable television revenue increased by 80% from (pound)35.9 million in 1994 to (pound)64.7 million in 1995. This increase was attributable to an 82% increase in the average number of customers (from 139,371 to 253,049) resulting from the inclusion, for the post-acquisition period only, of the former SBCC franchises which contributed 148,987 customers at the year end and an increase in the number of homes passed and marketed in other franchises (from 805,475 to 1,142,860). Average monthly revenue was flat at (pound)21.33 in 1994 and (pound)21.32 in 1995 with the impact of lower SBCC pricing offsetting the increase of 3.4% in the price of the Group's service packages in December 1994 and an increase in the premium channels per customer. Rates charged in the former SBCC franchises were increased in December 1995 to be more consistent with the rates in other franchises. Telephony revenue more than doubled from (pound)32.3 million in 1994 to (pound)75.0 million in 1995. Residential telephony increased by 145% (from (pound)23.5 million to (pound)57.6 million) primarily due to a 190% increase in the average number of residential lines during the year (from 80,933 to 234,400) resulting from the inclusion, for the post-acquisition period only, of the former SBCC franchises which contributed 194,217 lines at the year end and an increase in the number of homes passed and marketed in other franchises (from 580,708 to 968,863). This increase was partially offset by a 15% decrease in the average monthly revenue per line (from (pound)24.16 to (pound)20.48). This decrease was mainly attributable to the inclusion of the former SBCC franchises which had a lower average monthly revenue per line and price reductions in per minute call charges in response to price cutting from BT. In December 1995 line rental rates in the former SBCC franchises were increased to be more consistent with the rates in other franchises. Business telephony revenue increased by 98% (from (pound)8.8 million to (pound)17.4 million) primarily due to a 127% increase in the average number of business telephony lines during the year (from 10,852 to 24,681), which was partially offset by a 13% decrease in the average monthly revenue per business 6 29 o TELEWEST COMMUNICATIONS plc - -------------------------------------------------------------------------------- line (from (pound)67.66 to (pound)58.92). This decrease was attributable to the inclusion of the former SBCC franchises, which have historically marketed their services to smaller businesses which had a lower average monthly revenue per line, and price reductions in per minute call charges in response to competition. Other revenue increased 29% during 1995 and is derived primarily from management fees for services provided to Affiliated Companies, cable publications and network management services provided to other operators and advertising sales. Operating costs and expenses Programming costs as a percentage of cable television revenue increased from 43% in 1994 to 50% in 1995 as a result of more channels being provided to customers and a higher premium to basic channel ratio. These costs are generally higher for premium channels than for basic channels. As a percentage of telephony revenue, interconnection charges declined from 46% in 1994 to 39% in 1995 as line rental income, which incurs no third party cost, represented a larger proportion of total average revenue per line in 1995 than in 1994. Selling, general and administrative expenses decreased as a percentage of revenue from 84% in 1994 to 73% in 1995. A portion of labour and overhead costs are capitalised as they relate to the construction of the network. Total labour and overhead costs capitalised in 1995 amounted to (pound)26.6 million, compared to (pound)22.8 million in 1994. The increase in depreciation expense of 103% in 1995 under UK GAAP (98% under US GAAP) was the result of capital expenditure associated with the Group's construction activities. Under US GAAP, amortisation expense increased from (pound)1.8 million in 1994 to (pound)7.9 million in 1995 primarily due to the amortisation of the goodwill arising on the acquisition of SBCC. Under UK GAAP, this goodwill has been written off to reserves. Other income (expense) The Group's share of the net losses of the Affiliated Companies was (pound)8.5 million and (pound)12.8 million for 1994 and 1995, respectively. Financial expenses, net, under UK GAAP, consisted principally of interest expense of (pound)23.8 million ((pound)10.1 million in 1994), an accounting loss on the sale of interest rate swaps of (pound)5.5 million ((pound)nil in 1994), exchange losses on foreign currency translation of (pound)4.7 million ((pound)nil in 1994) offset by interest income earned on short-term investments and loans to Affiliated Companies of (pound)15.6 million ((pound)2.3 million in 1994). Under US GAAP, financial expenses consisted of interest expense of (pound)26.6 million ((pound)10.1 million in 1994), loss on the sale of interest rate swaps of (pound)8.6 million ((pound)nil in 1994), and exchange losses on foreign currency translation of (pound)14.6 million ((pound)nil in 1994). Interest expense and exchange losses on foreign currency translation increased primarily as a result of the finance costs payable on the Senior Debentures and the Senior Discount Debentures. LIQUIDITY AND CAPITAL RESOURCES During the year, the Group entered into a (pound)1.2 billion senior secured credit facility with a syndicate of banks (the "Senior Secured Facility"). The Senior Secured Facility will be used to finance the capital expenditure, working capital requirements and other permitted related activities for the construction and operation of the wholly owned telephony and television franchises of the Group; to fund the payment of cash interest on the Senior Debentures and Senior Discount Debentures (as described below); to fund the repayment of existing secured borrowings of the Group in respect of the London South and South West Regional Franchise Areas; to fund loans to or investments in Affiliated Companies; to fund the acquisition and subsequent construction of local delivery operators/ franchises; and to refinance advances and the payment of 7 30 o TELEWEST COMMUNICATIONS plc - -------------------------------------------------------------------------------- interest, fees and expenses in respect of the Senior Secured Facility. The Senior Secured Facility is divided into two tranches, the first, (tranche A), is available on a revolving basis for up to (pound)300 million, reducing to (pound)100 million by 30 June 1998, with full repayment by 31 December 1998. The second tranche, (tranche B), is available on a revolving basis concurrently with the first tranche for an amount up to 6.5 times the trailing, rolling six month annualised consolidated net operating cash flow, gradually reducing throughout the period of the facility to 4 times by 1 January 2000. Thereafter, the amount outstanding under the facility converts to a term loan amortising over 5 years. The aggregate drawing at any time under both tranches cannot exceed (pound)1.2 billion. Borrowings under the Senior Secured Facility are secured by assets, including the partnership interests and shares of subsidiaries of the Group, and bear interest at 2.25% above LIBOR for tranche A and between 0.5% and 1.875% above LIBOR (depending on the ratio of borrowings to the trailing, rolling six month annualised consolidated net operating cash flow) for tranche B. The Group's ability to borrow under the Senior Secured Facility is subject to, among other things, its compliance with the financial and other covenants and borrowing conditions contained therein, and the failure to comply with such covenants could result in all such amounts outstanding under the facility becoming due and payable. In October 1996, the first drawdown in the amount of (pound)100 million was made under tranche A of the Senior Secured Facility. Further drawdowns of (pound)50 million under tranche A and (pound)50 million under tranche B were made early in 1997. The Group has entered into certain delayed-starting interest rate swap agreements in order to manage interest rate risk on the Senior Secured Facility. The interest rate swaps convert floating rate interest payable on drawdowns under the facility to fixed interest rate payments in the range of 7.835% - 7.975%. The swap agreements, which commence in early 1997, have a five-year maturity and a notional principal amount which adjusts upwards on a semi-annual basis to a maximum of (pound)750 million. On 3 October 1995, the Group raised (pound)734 million through the issue of $300 million principal amount of 95/8% Senior Debentures due 2006 (the "Senior Debentures") and $1,536 million principal amount at maturity of 11% Senior Discount Debentures due 2007 (the "Senior Discount Debentures"). Interest on the Senior Debentures is payable semi-annually and commenced on 1 April 1996; interest on the Senior Discount Debentures will be payable semi-annually commencing on 1 April 2001. The proceeds of the issue were used by the Group to fund general working capital, capital expenditures and additional investments in Affiliated Companies, to repay a credit facility entered into by a Group company and to purchase the currency hedge arrangements as described below. The Group's principal hedge instruments are a combined foreign currency and interest rate swap ("Foreign Currency Swap") and a foreign currency option. The Foreign Currency Swap fully hedges against adverse exchange rate fluctuations on the principal amount of the Senior Debentures and the associated interest payments. The foreign currency option provides protection against exchange rate fluctuations on the Senior Discount Debentures below a rate of $1.452: (pound)1, and allows the Group to benefit from positive exchange rate movements. Both hedging instruments provide protection up to 1 October 2000, the early redemption date of the Senior Debentures and the Senior Discount Debentures. The Group's results may be materially influenced by future exchange rate movements, particularly in the US GAAP financial statements, due to the requirement that the hedge instruments and the debentures are marked to their market value at the end of the financial period. 8 31 o TELEWEST COMMUNICATIONS plc - -------------------------------------------------------------------------------- The Group generated a net cash inflow/(outflow) from operating activities of (pound)28.5 million, ((pound)10.2) million, and ((pound)1.9) million in 1996, 1995 and 1994, respectively, under UK GAAP. On a US GAAP basis, net cash provided by/(used in) operating activities was (pound)18.1 million, ((pound)6.6) million and ((pound)9.2) million in 1996, 1995 and 1994, respectively. The difference between UK and US GAAP is principally due to a difference in the classification of interest on the cash flow statement. The Group incurred net cash outflow from investing activities of (pound)483.2 million, (pound)265.8 million and (pound)231.9 million in 1996, 1995 and 1994, respectively. The Group's principal investing activities continue to be the construction of the network, the provision of funding to the Affiliated Companies, and, in the year ended 31 December 1996, the acquisition of a franchise covering the Worcester area from Bell Cablemedia plc for (pound)9.8 million. Total expenditure on fixed assets was (pound)515.6 million, (pound)269.1 million and (pound)215.5 million in 1996, 1995 and 1994, respectively. The increase in expenditure was largely a result of the inclusion for a full year in 1996 of the expenditure relating to the construction of the network in the former SBCC franchises. The Group expects to continue to have significant funding requirements for the foreseeable future to construct its network. Cash inflow from financing activities was (pound)79.0 million, (pound)480.8 million and (pound)482.5 million in 1996, 1995 and 1994, respectively. In 1996, the cash inflow from financing activities was principally generated through the (pound)100.0 million drawdown under the Senior Secured Facility which was partially offset by costs of (pound)18.4 million incurred to arrange the facility; in 1995, the cash inflow was generated by net proceeds of (pound)734.2 million arising from the issue of the debentures which were partially used to purchase the associated currency hedges and to repay a credit facility entered into by a Group company; in 1994, the cash inflow was generated by drawdowns under a former revolving credit facility, cash contributions made by the former joint venturers to the Company, and proceeds arising from the initial public offering of the Company in November 1994, the latter of which was used in part to repay earlier drawdowns under the former revolving credit facility. Cash balances at 31 December 1996 were (pound)79.1 million. The Group currently expects that the anticipated funding requirements (after taking into account current cash and deposit balances and anticipated revenues) required to substantially complete the construction of the owned and operated network (including the recently acquired franchises of Worcester and Southport), to fund the Group's operations, to upgrade older portions of the network, and to pay interest on the Group's debt will be provided by the Senior Secured Facility. There can be no assurance that the Group will not elect to use alternative funding sources or that the Group's current anticipated funding requirements will be in line with expectations. The Group is continually evaluating investment opportunities as the market for cable services in the UK develops and such opportunities may require additional funding. The Group has announced its intention to develop an interfranchise network and to launch digital services and in this context is evaluating the funding requirements and considering debt financing opportunities. - - 9 - -------------------------------------------------------------------------------- TELWEST COMMUNICATIONS plc UK GAAP o 47 - -------------------------------------------------------------------------------- AUDITORS' REPORT to the members of Telewest Communications plc We have audited the financial statements on pages 48 to 66. We have also examined the amounts disclosed relating to emoluments and share options which form part of the Report of the Directors on page 38 and the Report of the Remuneration Committee on pages 42 and 43. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS As described on page 46 the Company's Directors are responsible for the preparation of financial statements. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board in the United Kingdom. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the counting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. OPINION In our opinion the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 1996 and of the loss of the Group for the year then ended and have been properly prepared in accordance with the United Kingdom Companies Act 1985. KPMG AUDIT PLC Chartered Accountants Registered Auditors 11 March 1997 London 10 - -------------------------------------------------------------------------------- 48 o UK GAAP TELEWEST COMMUNICATIONS plc - -------------------------------------------------------------------------------- CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 1996
1996 1995 Note BP'000 BP'000 - -------------------------------------------------------------------------------- TURNOVER 2 290,266 144,784 Operating costs 3 (419,517) (228,556) - -------------------------------------------------------------------------------- OPERATING LOSS (129,251) (83,772) Share of results of associated undertakings 13 (15,203) (12,103) Other interest receivable and similar income 8 17,222 15,645 Interest payable and similar charges 9 (122,671) (34,435) - -------------------------------------------------------------------------------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 5 (249,903) (114,665) Tax on loss on ordinary activities 10 (820) (690) - -------------------------------------------------------------------------------- LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (250,723) (115,355) Minority interests 19 (180) (16) - -------------------------------------------------------------------------------- LOSS FOR THE FINANCIAL YEAR 21 (250,903) (115,371) ================================================================================ LOSS PER EQUITY SHARE (PENCE) 11 (17.7) (10.5) ================================================================================
The Group has no recognised gains or losses other than those reflected in the profit and loss account. The above results are in respect of continuing operations of the Group. 11 CONSOLIDATED BALANCE SHEET as at 31 December 1996
1996 1995 NOTE (POUND STERLING) (POUND STERLING) '000 '000 - ------------------------------------------------------------------------------------------------------------------ FIXED ASSETS Tangible assets 12 1,447,194 1,063,808 Investments 13 117,410 191,028 - -------------------------------------------------------------------------------------------------------------- 1,564,604 1,254,836 - -------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Stocks 14 53 40 Debtors 15 66,929 54,980 Cash at bank and in hand 79,116 464,818 - -------------------------------------------------------------------------------------------------------------- 146,098 519,838 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 16 (212,434) (137,744) - -------------------------------------------------------------------------------------------------------------- NET CURRENT (LIABILITIES)/ASSETS (66,336) 382,094 - -------------------------------------------------------------------------------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 1,498,268 1,636,930 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 17 (918,008) (795,066) MINORITY INTERESTS 19 (347) (167) - -------------------------------------------------------------------------------------------------------------- NET ASSETS 579,913 841,697 ============================================================================================================== CAPITAL AND RESERVES Called up share capital 20 142,363 141,603 Share premium 21 9,187 -- Merger reserve 21 535,267 556,095 Other reserves 21 270,237 270,237 Profit and loss account 21 (377,141) (126,238) - -------------------------------------------------------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 579,913 841,697 ==============================================================================================================
The financial statements were approved by the Board of Directors on 11 March 1997 and signed on its behalf by: SJ Davidson Director CJ Burdick Director 12 COMPANY BALANCE SHEET as at 31 December 1996
1996 1995 NOTE (POUNDS STERLING) (POUNDS STERLING) '000 '000 - ---------------------------------------------------------------------------------------------------------------- FIXED ASSETS Investments 13 233,289 242,916 - ---------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Debtors: due within one year 15 71 225,807 Debtors: due after more than one year 15 1,053,279 -- Cash at bank and in hand 48,481 428,067 - ---------------------------------------------------------------------------------------------------------------- 1,101,831 653,874 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 16 (8,273) (14,358) - ---------------------------------------------------------------------------------------------------------------- NET CURRENT ASSETS 1,093,558 639,516 - ---------------------------------------------------------------------------------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 1,326,847 882,432 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 17 (1,230,153) (757,482) - ---------------------------------------------------------------------------------------------------------------- NET ASSETS 96,694 124,950 ================================================================================================================ CAPITAL AND RESERVES Called up share capital 20 142,363 141,603 Share premium 21 9,187 -- Profit and loss account 21 (54,856) (16,653) - ---------------------------------------------------------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 96,694 124,950 ================================================================================================================
The financial statements were approved by the Board of Directors on 11 March 1997 and signed on its behalf by: SJ Davidson Director CJ Burdick Director 13 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 1996
1996 1995 NOTE (POUNDS STERLING) (POUNDS STERLING) '000 '000 - ----------------------------------------------------------------------------------------------------------------------------- NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 23 28,479 (10,205) - ----------------------------------------------------------------------------------------------------------------------------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 18,206 11,568 Interest paid (25,795) (6,041) Interest element of finance lease payments (2,754) (1,930) - ----------------------------------------------------------------------------------------------------------------------------- NET CASH (OUTFLOW)/INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (10,343) 3,597 - ----------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of tangible fixed assets (464,367) (254,453) Sale of tangible fixed assets 3,059 688 Purchase of subsidiary undertakings 26 (14,167) (3,232) Investment in associated undertakings and other participating interests (7,728) (9,143) Other investing activities -- 335 - ----------------------------------------------------------------------------------------------------------------------------- NET CASH OUTFLOW FROM INVESTING ACTIVITIES (483,203) (265,805) - ----------------------------------------------------------------------------------------------------------------------------- NET CASH OUTFLOW BEFORE FINANCING (465,067) (272,413) - ----------------------------------------------------------------------------------------------------------------------------- FINANCING Cash paid for credit facility arrangement costs (18,400) -- Proceeds from debenture issue -- 754,812 Cash paid for foreign currency option -- (88,070) Cash paid for debenture issue costs (829) (20,574) Payment of share issue costs -- (6,141) Proceeds from borrowings 100,400 -- Repayment of borrowings (937) (157,930) Capital element of finance lease payments (1,231) (1,291) - ---------------------------------------------------------------------------------------------------------------------------- NET CASH INFLOW FROM FINANCING 79,003 480,806 - ---------------------------------------------------------------------------------------------------------------------------- (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS 27 (386,064) 208,393 ============================================================================================================================
14 RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS for the year ended 31 December 1996
GROUP COMPANY GROUP COMPANY 1996 1996 1995 1995 NOTE (POUNDS (POUNDS (POUNDS (POUNDS STERLING) STERLING) STERLING) STERLING) '000 '000 '000 '000 - ------------------------------------------------------------------------------------------------------------------------ Opening equity shareholders' funds 841,697 124,950 743,716 - Loss for the financial year (250,903) (38,203) (115,371) (16,653) Issue of shares 10,676 9,947 678,174 141,603 Goodwill written off 4 (21,557) - (464,872) - Movement arising from Group reconstruction - - 50 - - ------------------------------------------------------------------------------------------------------------------------ CLOSING EQUITY SHAREHOLDERS' FUNDS 579,913 96,694 841,697 124,950 ========================================================================================================================
15 NOTES forming part of the financial statements 1 ACCOUNTING POLICIES The principal accounting policies which have been applied consistently throughout the year in the preparation of the financial statements are as follows: BASIS OF PREPARATION The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules. The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings together with associated undertakings to the extent of the Group's interest in those undertakings. The results of subsidiary undertakings acquired during the year are included in the consolidated profit and loss account from the date of acquisition. The Company has taken advantage of Section 230 of the Companies Act 1985 and has not presented a profit and loss account. The loss of the Company for the financial year is disclosed in Note 21 to these financial statements. The Directors have included unaudited pro forma Group turnover and operating cost information for the year ended 31 December 1995 in Notes 2 and 3 to these financial statements which consolidate the turnover and operating costs of Telewest Communications (Midlands & North West) Limited ("TCMN"), formerly SBCC, a subsidiary undertaking acquired on 3 October 1995, as if this subsidiary undertaking had been owned for the entire year. This pro forma information has been included to facilitate the analysis of results given the significance of this acquisition to the Group. INVESTMENTS Investments in subsidiary undertakings are stated in the Company balance sheet at cost. The consolidated profit and loss account includes the Group's share of the losses of associated undertakings and the consolidated balance sheet includes the investment in these companies at the Group's share of their net assets. GOODWILL Purchased goodwill on acquisition of subsidiary undertakings, representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired, is set off directly against reserves. CAPITALISATION OF OVERHEADS Subsidiary undertakings capitalise that proportion of overheads which relates to the construction of the cable network. DEPRECIATION Depreciation is provided to write off the cost, less estimated residual value, of tangible fixed assets by equal instalments over their estimated useful economic lives as follows: Freehold and long leasehold buildings 50 years Cable and ducting 20 years Electronic equipment - System electronics 8 years - Switching equipment 8 years - Subscriber electronics 5 years - Headend, studio and playback facilities 5 years Other equipment - Office furniture and fittings 5 years - Motor vehicles 4 years Depreciation of cable and ducting and systems electronics is charged monthly on their estimated cost at the end of the prematurity period, scaled down by a ratio of average customers in the current period to the estimated customer base at the end of the prematurity period. Preconstruction costs are amortised over the life of the franchise from the date of the first customer. The estimated useful lives of cable and ducting and system electronics assets were reassessed with effect from 1 January 1996 and changed from 25-30 years and 10 years to 20 years and 8 years, respectively. The net book value of these assets is being written-off over their revised estimated remaining lives. FOREIGN CURRENCIES Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies, to the extent that they are not hedged by financial instruments, are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account. LEASES Where the Group enters into a lease which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a finance lease. The asset is recorded in the balance sheet as a tangible fixed asset and is depreciated over its estimated useful life or the term of the lease, whichever is shorter. Future instalments under such leases, net of finance charges, are included within creditors. Rentals payable are apportioned between the finance element, which is charged to the profit and loss account, and the capital element which reduces the outstanding obligation for future instalments. 16 NOTES TURNOVER Turnover represents the invoiced value (excluding value added tax) of services supplied by the Group. STOCKS Stocks are stated at the lower of cost and net realisable value. FRANCHISE COSTS Expenditure incurred on successful applications for franchise licences is included in tangible fixed assets and is amortised over the life of the original franchise term. Costs relating to unsuccessful applications are written off to the profit and loss account. TAXATION The charge for taxation is based on the loss for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Provision is made for deferred tax only to the extent that it is probable that an actual asset or liability will crystallise. PENSION COSTS The Group operates a defined contribution pension scheme or contributes to a third-party scheme of the employee's choice. The amount charged against the profit and loss account represents the contributions payable to the selected schemes in respect of the accounting period. RESTRICTED SHARE SCHEME The value of awards over ordinary shares granted to eligible employees under the Telewest Restricted Share Scheme is charged to the profit and loss account to the extent that the awards have been earned by employees in the current period. INTERCONNECTION WITH OTHER OPERATORS When telephony traffic is carried by other operators the Group incurs interconnect costs. Interconnect costs are subject to regulation in the form of a determination by the Office of Telecommunications. A determination may give rise to amendments, most often in the form of reductions, to interconnect costs relating to prior periods. The Group reviews its interconnect costs on a regular basis and adjusts the rate at which these costs are charged in the profit and loss account in accordance with the estimated interconnect costs for the current period. Amendments to costs relating to prior periods are made in the current period, but only when recovery or payment of these amounts is reasonably certain. FINANCIAL INSTRUMENTS The Group uses foreign currency options which permit, but do not require, the Group to exchange foreign currencies at a future date with another party at a contracted exchange rate (the "Forward Rate"). Such contracts are used to hedge against adverse changes in foreign currency exchange rates associated with certain obligations denominated in foreign currency. The premium paid to enter into these options is included on the balance sheet as a fixed asset investment and is amortised to the profit and loss account over the life of the option at a constant rate of the carrying value of the obligation it hedges. The difference between the contracted amount to be exchanged under the option translated at the Forward Rate and the contracted amount translated at the spot rate at the inception of the contract is also amortised to the profit and loss account over the life of the option at a constant rate of the carrying value of the obligation. The carrying value of the obligation is increased for the amortised portion of the difference. To the extent that the Sterling values of the Group's foreign currency obligations, translated at the year-end exchange rate, are less than their carrying values as determined above, the carrying values of the obligation are reduced. The carrying value of the foreign currency option used to hedge the obligations is reduced by an equivalent amount. The Group also enters into combined foreign currency and interest rate swap contracts ("Foreign Currency Swaps") to hedge against adverse changes in foreign currency exchange rates associated with obligations denominated in foreign currency. The principal element of Foreign Currency Swaps is translated at the spot rate at the reporting date with any gain or loss on translation recognised in the profit and loss account. Such gains and losses are offset against gains and losses arising on the translation of the obligations which have been hedged. The interest element of Foreign Currency Swaps is accounted for on an accruals basis with the net interest income or expense recognised in the profit and loss account as it is earned and payable. Interest rate swap agreements which are used to manage interest rate risk on the Group's borrowings are accounted for using the accruals method. Net income or expense resulting from the differential between exchanging floating and fixed rate interest payments is recorded on an accruals basis. To the extent that the interest rate swap agreements are delayed starting, net income or expense is not recognised until the effective date of the agreement. FINANCE COSTS Costs incurred in raising funds are deducted from the amount raised and amortised over the life of the debt facility on a constant-yield basis. Where the period and utilisation of the debt facility is uncertain, the amortisation rate is determined by reference to the Group's estimated future financing requirements. 17 2 SEGMENTAL INFORMATION Turnover is attributable principally to the provision of cable television and telephony services in the United Kingdom which the Directors consider to be the same class of business and, accordingly, no segmental analysis of operating loss or net assets is shown. Turnover comprised the following:
PRO FORMA 1995 1996 1995 (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 (NOTE 1) - -------------------------------------------------------------------------------- Cable television 121,224 64,740 83,735 Telephony - residential 125,013 57,597 81,222 Telephony - business 34,562 17,449 20,571 Other 9,467 4,998 5,667 - -------------------------------------------------------------------------------- 290,266 144,784 191,195 ================================================================================
3 OPERATING COSTS
PRO FORMA 1995 1996 1995 (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 (NOTE 1) - -------------------------------------------------------------------------------- Programming expenses 69,906 32,194 42,859 Telephony expenses 52,572 29,526 38,741 Selling, general and administrative expenses 167,323 105,311 137,680 Depreciation and amortisation 129,716 61,525 82,344 - -------------------------------------------------------------------------------- 419,517 228,556 301,624 ================================================================================
Having regard to the special nature of the Group's business, the analysis of operating costs as prescribed by the Companies Act 1985 is not meaningful. In the circumstances, therefore, as required by paragraph 3(3) of Schedule 4 of the Companies Act 1985, the Directors have adapted the prescribed format to the requirements of the Group's business. 4 ACQUISITIONS IN THE YEAR On 10 January 1996, the Company acquired the entire issued share capital of Telewest Communications (Worcester) Limited, then known as Bell Cablemedia (Worcester) Limited and the owner of the Worcester cable franchise, for cash consideration of (sterling pound)9,849,000. Telewest Communications (Worcester) Limited was otherwise a dormant company with net assets of (pound sterling)2 representing its called up share capital. This acquisition has been accounted for under the acquisition method of accounting. The goodwill arising on acquisition, in the amount of (pound sterling)9,848,998, has been set off against the merger reserve. During the year, the Company made various other minor acquisitions, largely for share consideration. Details of these acquisitions are set out in Note 20 to the financial statements. The goodwill arising on these acquisitions, in the amount of (pound sterling)11,708,000, has also been set-off against the merger reserve. The cumulative goodwill written off against reserves at 31 December 1996 was (pound sterling)486,429,000 (1995: (pound sterling)464,872,000). 5 LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION Loss on ordinary activities before taxation is stated after charging:
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Auditors' remuneration: Audit 290 250 Other services 168 219 Depreciation and other amounts written off tangible fixed assets: Owned 122,610 56,825 Leased 7,106 3,194 Exchange losses 25,852 4,732 Hire of plant and machinery - rentals payable under operating leases 129 116 Hire of other assets - operating leases 2,936 2,160 ================================================================================
The auditors' remuneration for audit services to the Company was (pound sterling)20,000 (1995: (pound sterling)20,000). In addition to the amounts stated above for auditors' remuneration, the Group paid (pound sterling)820,000 in 1995 to the auditors for services provided in connection with the acquisition of TCMN. This amount has been included in the costs of acquisition in the consolidated financial statements. 6 REMUNERATION OF DIRECTORS
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Fees to non-executive Directors 114 122 Remuneration as executives: Basic salary, allowances and taxable benefits 416 1,071 Performance-related bonuses 25 79 Other bonuses -- 140 Pension contributions 18 24 Compensation for loss of office (payable by the Company) 539 487 - -------------------------------------------------------------------------------- Total emoluments in respect of the year 1,112 1,923 ================================================================================
Of the above remuneration, (pound sterling)93,000 and (pound sterling)426,000, was reimbursed to TCI and US WEST for the years ended 31 December 1996, and 1995, respectively, for making available to the Company the services of certain Directors. The Chairman did not receive any remuneration during the year (1995: (pound sterling)nil). The remuneration of the highest paid Director was as follows:
1996 1995 (POUND (POUND STERLING)'000 (STERLING)'000 - -------------------------------------------------------------------------------- Basic salary, allowances and taxable benefits 248 427 Performance-related bonuses 25 51 Other bonuses -- 70 Pension contributions 13 5 - -------------------------------------------------------------------------------- Total emoluments in respect of the year 286 553 ================================================================================
18 NOTES 6 REMUNERATION OF DIRECTORS (CONTINUED) The emoluments, excluding pension contributions, of Directors who perform their duties wholly or mainly within the United Kingdom fell within the following ranges:
1996 1995 DIRECTORS DIRECTORS - -------------------------------------------------------------------------------- (pound sterling)0 -(pound sterling)5,000 1 2 (pound sterling)25,001 -(pound sterling)30,000 1 - (pound sterling)30,001 -(pound sterling)35,000 1 1 (pound sterling)35,001 -(pound sterling)40,000 - 1 (pound sterling)45,001 -(pound sterling)50,000 1 - (pound sterling)50,001 -(pound sterling)55,000 - 1 (pound sterling)165,001 -(pound sterling)170,000 1 - (pound sterling)250,001 -(pound sterling)255,000 - 1 (pound sterling)270,001 -(pound sterling)275,000 1 - (pound sterling)485,001 -(pound sterling)490,000 - 1 (pound sterling)545,001 -(pound sterling)550,000 - 1 ================================================================================
A detailed analysis of Directors' remuneration, including salaries and benefits, performance-related bonuses and other bonuses is set out in the Report of the Remuneration Committee on pages 42 and 43. Details of Directors' interests in the share capital of the Company are set out in the Report of the Directors on page 38. 7 STAFF NUMBERS AND COSTS The average number of persons employed by the Group (including Directors and those seconded from shareholders) during the year, analysed by category, was as follows:
1996 1995 NUMBER NUMBER - -------------------------------------------------------------------------------- Sales and customer services 2,114 1,309 Construction and operations 1,827 889 Administration 715 578 - -------------------------------------------------------------------------------- 4,656 2,776 ================================================================================
The aggregate payroll costs of these persons, including amounts which have been capitalised in tangible fixed assets, were as follows:
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Wages and salaries 90,559 57,035 Social security costs 8,977 5,491 Other pension costs 2,580 1,538 - -------------------------------------------------------------------------------- 102,116 64,064 ================================================================================
8 OTHER INTEREST RECEIVABLE AND SIMILAR INCOME
1996 199 (POUND (POUND STERLING)'000 STERLING)'00 - -------------------------------------------------------------------------------- On bank deposits and short-term investments 14,928 14,014 On loans made to associated undertakings 1,723 1,631 Other 571 -- - -------------------------------------------------------------------------------- 17,222 15,645 ================================================================================
9 INTEREST PAYABLE AND SIMILAR CHARGES
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- On bank loans and overdrafts and other loans: Wholly repayable within five years 3,816 2,583 Wholly or partly repayable in more than five years 1,924 -- Finance costs of Senior Discount Debentures 60,696 13,663 Finance costs of Senior Debentures 22,471 5,643 Finance charges payable in respect of finance leases and hire purchase contracts 3,442 1,928 Exchange losses on foreign currency translation, net 25,852 4,732 Loss on sale of interest rate swap -- 5,467 Other 4,470 419 - -------------------------------------------------------------------------------- 122,671 34,435 ================================================================================
The exchange gain for the year on the translation of the US Dollar denominated Senior Discount Debentures amounted to (pound sterling)53,025,000. This amount has been offset by an adjustment of an equal amount to the unamortised value of the premium paid for the foreign currency option which hedges the Senior Discount Debentures. 10 TAX ON LOSS ON ORDINARY ACTIVITIES
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Corporation tax on taxable profit at 33% 50 16 Share of associated undertaking's tax 770 674 - -------------------------------------------------------------------------------- 820 690 ================================================================================
The corporation tax charge for the year arises on the taxable profits of a subsidiary undertaking which cannot be fully relieved by the tax losses within the Group. 11 LOSS PER SHARE The calculation of loss per equity share is based on the loss on ordinary activities after taxation and minority interests for the year, divided by the weighted average number of equity shares of the Company in issue during the year of 1,421,492,181 (1995: 1,102,384,337). 19 12 TANGIBLE FIXED ASSETS
GROUP FREEHOLD AND FREEHOLD LONG LEASEHOLD CABLE AND ELECTRONIC OTHER LAND BUILDINGS DUCTING EQUIPMENT EQUIPMENT TOTAL (POUND (POUND (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------------------------------------------------------------------ COST At 1 January 1996 4,223 36,005 766,866 359,617 79,239 1,245,950 Additions -- 9,951 335,844 130,783 39,012 515,590 Disposals -- -- (749) (565) (4,792) (6,106) - ------------------------------------------------------------------------------------------------------------------------------------ At 31 December 1996 4,223 45,956 1,101,961 489,835 113,459 1,755,434 - ------------------------------------------------------------------------------------------------------------------------------------ ACCUMULATED DEPRECIATION At 1 January 1996 -- 4,920 74,532 70,810 31,880 182,142 Charge for the year -- 2,458 47,374 60,220 19,664 129,716 On disposals -- -- (725) (547) (2,346) (3,618) - ------------------------------------------------------------------------------------------------------------------------------------ At 31 December 1996 -- 7,378 121,181 130,483 49,198 308,240 - ------------------------------------------------------------------------------------------------------------------------------------ NET BOOK VALUE AT 31 DECEMBER 1996 4,223 38,578 980,780 359,352 64,261 1,447,194 ==================================================================================================================================== At 31 December 1995 4,223 31,085 692,334 288,807 47,359 1,063,808 ====================================================================================================================================
Included in the net book value of electronic equipment and other equipment is (pound sterling)38,258,000 and (pound sterling)6,880,000, respectively, (1995: (pound sterling)23,796,000 and (pound sterling)1,080,000, respectively) in respect of assets held under finance leases and similar hire purchase contracts. Depreciation charged on these assets was (pound sterling)7,106,000. 13 FIXED ASSET INVESTMENTS
GROUP ASSOCIATED UNDERTAKINGS ---------------------------- FOREIGN SHARE OTHER OWN CURRENCY OF NET PARTICIPATING SHARES OPTION ASSETS LOANS INTERESTS HELD PREMIUM TOTAL (POUND (POUND (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------------------------------------------------------------------ COST At 1 January 1996 69,997 24,593 20,666 7,280 88,070 210,606 Additions 194 4,496 5,000 -- -- 9,690 Released during the year -- -- -- (115) -- (115) - ------------------------------------------------------------------------------------------------------------------------------------ At 31 December 1996 70,191 29,089 25,666 7,165 88,070 220,181 - ------------------------------------------------------------------------------------------------------------------------------------ SHARE OF POST-ACQUISITION LOSSES At 1 January 1996 (13,887) -- -- -- -- (13,887) Share of loss on ordinary activities before taxation (15,203) -- -- -- -- (15,203) Share of tax on loss on ordinary activities (770) -- -- -- -- (770) PROVISION At 1 January 1996 -- -- -- (2,806) -- (2,806) Charge for the year -- -- -- (1,380) -- (1,380) AMORTISATION OF FOREIGN CURRENCY OPTION PREMIUM At 1 January 1996 -- -- -- -- (2,885) (2,885) Charge for the year -- -- -- -- (12,815) (12,815) Valuation adjustment to option premium -- -- -- -- (53,025) (53,025) - ------------------------------------------------------------------------------------------------------------------------------------ At 31 December 1996 (29,860) -- -- (4,186) (68,725) (102,771) - ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENTS AT 31 DECEMBER 1996 40,331 29,089 25,666 2,979 19,345 117,410 ==================================================================================================================================== At 31 December 1995 56,110 24,593 20,666 4,474 85,185 191,028 ====================================================================================================================================
20 NOTES 13 FIXED ASSET INVESTMENTS (CONTINUED)
COMPANY FOREIGN LOANS OWN CURRENCY SUBSIDIARY PARTICIPATING TO GROUP SHARES OPTION UNDERTAKINGS INTERESTS UNDERTAKINGS HELD PREMIUM TOTAL (POUND (POUND (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------------------------------------------------------------------ COST At 1 January 1996 153,257 -- -- 7,280 88,070 248,607 Additions 18,993 2,033 5,000 -- -- 26,026 Transfer from group undertaking -- 31,682 -- -- -- 31,682 Released during the year -- -- -- (115) -- (115) - ------------------------------------------------------------------------------------------------------------------------------------ At 31 December 1996 172,250 33,715 5,000 7,165 88,070 306,200 - ------------------------------------------------------------------------------------------------------------------------------------ PROVISION At 1 January 1996 -- -- -- (2,806) -- (2,806) Charge for the year -- -- -- (1,380) -- (1,380) AMORTISATION OF FOREIGN CURRENCY OPTION PREMIUM At 1 January 1996 -- -- -- -- (2,885) (2,885) Charge for the year -- -- -- -- (12,815) (12,815) Valuation adjustment to option premium -- -- -- -- (53,025) (53,025) - ------------------------------------------------------------------------------------------------------------------------------------ At 31 December 1996 -- -- -- (4,186) (68,725) (72,911) - ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENTS AT 31 DECEMBER 1996 172,250 33,715 5,000 2,979 19,345 233,289 ==================================================================================================================================== At 31 December 1995 153,257 -- -- 4,474 85,185 242,916 ====================================================================================================================================
Details of principal subsidiary undertakings, associated undertakings, and other participating interests of the Group are set out on pages 65 and 66. OWN SHARES HELD At 31 December 1996, own shares held comprised 3,937,000 ordinary shares of 10 pence held by the Telewest Employee Share Ownership Plan Trust (the "Telewest ESOP") for awards under the Telewest Restricted Share Scheme, a scheme designed to provide incentives to executives of the Company. Further details on the Telewest Restricted Share Scheme are set out on page 41 of the Report of the Remuneration Committee. The market value at 31 December 1996 of the shares held was 124 pence per share; the carrying value of the shares held is 182 pence per share, being the cost of the shares at the date they were acquired by the Telewest ESOP. At 31 December 1996, 2,648,000 ordinary shares had been awarded to executives of the Group, leaving the remaining 1,289,000 shares available for future awards to eligible executives. The provision made against own shares held represents awards earned by executives in respect of services to the Group. The Telewest ESOP received an interest-free loan of (pound sterling)7,280,000 from the Group to subscribe for the ordinary shares to establish the Telewest ESOP. The loan is to be repaid by way of cash contributions made to the ESOP Trustees by subsidiary undertakings of the Group. At 31 December 1996, the Telewest ESOP owed (pound sterling)4,474,000 to the Group. 21 14 STOCKS All stock is in the form of raw materials and consumables. 15 DEBTORS
GROUP COMPANY GROUP COMPANY 1996 1996 1995 1995 (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- DUE WITHIN ONE YEAR Trade debtors 29,305 -- 23,123 -- Amounts owed by subsidiary undertakings -- -- -- 222,195 Other debtors 27,925 8 22,243 3,612 Prepayments and accrued income 9,524 63 9,444 -- - -------------------------------------------------------------------------------- 66,754 71 54,810 225,807 - -------------------------------------------------------------------------------- DUE AFTER MORE THAN ONE YEAR Amounts owed by subsidiary undertakings -- 1,053,279 -- -- Other debtors 175 -- 170 -- - -------------------------------------------------------------------------------- 175 1,053,279 170 -- - -------------------------------------------------------------------------------- 66,929 1,053,350 54,980 225,807 ================================================================================
16 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
GROUP COMPANY GROUP COMPANY 1996 1996 1995 1995 (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Bank loans and overdrafts 2,949 -- 937 -- Obligations under finance leases and hire purchase contracts (Note 22) 2,716 145 929 -- Trade creditors 46,855 -- 40,402 1,390 Amounts owed to group undertakings -- 91 -- 3,372 Taxation and social security 4,068 -- 2,548 -- Other creditors 24,417 1,784 12,998 4,647 Accruals and deferred income 131,429 6,253 79,930 4,949 - -------------------------------------------------------------------------------- 212,434 8,273 137,744 14,358 ================================================================================
The bank loans are property loans secured on freehold land and buildings held by the Group. 17 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
GROUP COMPANY GROUP COMPANY 1996 1996 1995 1995 (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Senior Debentures due 2006 171,499 171,499 188,540 188,540 Senior Discount Debentures due 2007 586,993 586,993 565,976 565,976 Senior Secured Facility 81,814 -- -- -- Other bank loans and overdrafts 400 -- 2,949 -- Obligations under finance leases and hire purchase contracts (Note 22) 51,674 19,965 29,385 -- Foreign Currency Swap 20,875 20,875 2,966 2,966 Amounts owed to group undertakings -- 430,821 -- -- Other creditors 4,753 -- 5,250 -- - -------------------------------------------------------------------------------- 918,008 1,230,153 795,066 757,482 ================================================================================
The bank loan is a property loan secured on freehold land and buildings held by the Group. Bank loans and overdrafts are secured on Group property, carry interest at between 1.00% and 1.75% over LIBOR, and are repayable as follows:
GROUP GROUP 1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Between one and two years -- 2,949 Between two and five years 400 -- - -------------------------------------------------------------------------------- 400 2,949 ================================================================================
SENIOR DEBENTURES DUE 2006 The Group has issued US$300,000,000 principal amount of Senior Debentures (the "Senior Debentures") with a yield to maturity of 9.625%. The Senior Debentures mature on 1 October 2006. Interest on the Senior Debentures accrues semi-annually and is payable in arrears. The Senior Debentures are redeemable, in whole or in part, at the option of the Group at any time on or after 1 October 2000. The Group has entered into a Foreign Currency Swap which expires on 1 October 2000 to hedge its exposure to adverse fluctuations in exchange rates on the principal amount of the Senior Debentures. The terms of the Foreign Currency Swap 22 NOTES 17 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (CONTINUED) provided for the Group to make an initial exchange of principal of US$300,000,000 in exchange for (pound sterling)196,078,000. During the term of the Foreign Currency Swap, the Group is to make Sterling fixed-rate interest payments and is to receive US Dollar fixed-rate interest payments on the initial exchange amounts. On expiration, the initial principal amounts will be re-exchanged. The Senior Debentures are unsecured liabilities of the Group. SENIOR DISCOUNT DEBENTURES DUE 2007 The Group has issued US$1,536,413,000 principal amount at maturity of Senior Discount Debentures (the "Senior Discount Debentures") with a yield to maturity of 11%. At 31 December 1996, the unamortised portion of the discount on issue is (pound sterling)328,946,000 (1995: (pound sterling)387,197,000). The Senior Discount Debentures mature on 1 October 2007. Interest on the Senior Discount Debentures accrues semi-annually. Cash interest will not accrue on the Senior Discount Debentures prior to 1 October 2000 and is thereafter payable in arrears on 1 April and 1 October of each year at a rate of 11% per annum. The Senior Discount Debentures are redeemable, in whole or in part, at the option of the Group at any time on or after 1 October 2000. The Group has purchased a five-year Sterling put option to purchase US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange rates on the principal amount at the early redemption date of the Senior Discount Debentures. The put option has a strike price at expiration on 28 September 2000 of (pound sterling)1 = US$1.4520 ("the Forward Rate"). The option premium paid of (pound sterling)88,070,000 has been included on the balance sheet within fixed asset investments and is being amortised to the profit and loss account over the five-year term of the option at a constant rate of the carrying amount of the Senior Discount Debentures. The difference between the contracted amount translated at the Forward Rate and at the spot rate at the inception of the contract in the amount of (pound sterling)91,717,000 is also being amortised on the same basis to the profit and loss account. At 31 December 1996, the unamortised value of the option premium has been reduced by (pound sterling)53,025,000, representing the hedging of an equivalent foreign exchange gain on the Senior Discount Debentures during the year. The Senior Discount Debentures are unsecured liabilities of the Group. SENIOR SECURED FACILITY On 22 May 1996, the Group entered into a senior secured credit facility (the "Senior Secured Facility") with a syndicate of banks. The facility is divided into two tranches: the first portion (Tranche A) is available on a revolving basis for up to (pound sterling)300 million, reducing to (pound sterling)100 million by 30 June 1998 with full repayment by 31 December 1998; the second portion (Tranche B) is available on a revolving basis concurrently with Tranche A for an amount up to 6.5 times the trailing, rolling six month annualised consolidated net operating cash flow, gradually reducing throughout the period of the facility to 4 times by 1 January 2000. Thereafter, the amount outstanding under the Tranche B facility converts to a term loan amortising over 5 years. The aggregate drawing at any time under both tranches cannot exceed (pound sterling)1.2 billion. Borrowings under the facility are secured by the assets of the Group, including the partnership interests and shares of subsidiaries, and bear interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875% above LIBOR (depending on the ratio of borrowings to the trailing, rolling six month annualised consolidated net operating cash flow) for Tranche B. The Group's ability to borrow under the facility is subject to, among other things, its compliance with the financial and other covenants and borrowing conditions contained therein. In September 1996, the Group entered into certain delayed-starting interest rate swap agreements in order to manage interest rate risk on the Senior Secured Facility. The effective dates of the interest rate swap agreements are 2 January 1997 and 31 March 1997, and the agreements mature on 31 December 2001 and 28 March 2002 respectively. The aggregate notional principal amount of the swaps adjusts upwards on a semi-annual basis to a maximum of (pound sterling)750 million. In accordance with the swap agreements, the Group receives interest at the six-month LIBOR rate and pays a fixed interest rate in the range of 7.835 - 7.975%. 18 DEFERRED TAXATION The amount provided, and the full potential liability, in respect of deferred taxation is as follows:
GROUP GROUP 1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - -------------------------------------------------------------------------------- Tax effect of timing differences due to: Excess capital allowances over depreciation 110,600 -- Other 27,900 12,100 Trading losses (138,500) (12,100) - -------------------------------------------------------------------------------- -- -- ================================================================================
As at 31 December 1996, the Group estimates that it has, subject to Inland Revenue agreement, (pound sterling)940,000,000 (1995: (pound sterling)294,000,000) of tax losses, including losses arising prior to 1995 from the Group's predecessor businesses, available to relieve future profits. Accumulated tax losses at 31 December 1995 exclude capital allowances on assets which were available to the Group, but had not been claimed. At 31 December 1996, accumulated tax losses include a claim for all available capital allowances. No deferred tax asset has been recognised in respect of any unutilised tax losses. 23 19 MINORITY INTERESTS At 31 December 1996, the minority interests comprised 30,000 ordinary shares of (pound sterling)1 each and 20,000 cumulative convertible preference shares of (pound sterling)1 each in Cable Guide Limited, and 5,000 ordinary shares of 10 pence each in Telewest Communications (London South) Limited, together with the relevant minority share of the profits or losses of each entity. All minority interests are equity interests. 20 CALLED UP SHARE CAPITAL
NUMBER (POUND STERLING)000s - --------------------------------------------------------------------------- ------------------------------------------------------ CONVERTIBLE CONVERTIBLE ORDINARY PREFERENCE ORDINARY PREFERENCE SHARES OF SHARES OF SHARES OF SHARES OF 10p EACH 10p EACH 10p EACH 10p EACH TOTAL - ---------------------------------------------------------------------------- ----------------------------------------------------- AUTHORIZED At 1 January and 31 December 1996 2,010,000,000 661,000,000 201,000 66,100 267,100 ============================================================================ ===================================================== ALLOTTED, CALLED UP AND FULLY PAID At 1 January 1996 919,963,400 496,066,708 91,996 49,607 141,603 Issued during the year 7,604,200 -- 760 -- 760 - ----------------------------------------------------------------------------- ---------------------------------------------------- AT 31 DECEMBER 1996 927,567,600 496,066,708 92,756 49,607 142,363 ============================================================================ =====================================================
The consideration received in respect of the issue of shares during the year was as follows :
CONSIDERATION RECEIVED NUMBER OF SHARES ISSUED - ------------------------------------------------------------------------------------------------------------------------------------ Surrender by Trans-Global (UK) Limited of its option to acquire 9.9% of equity in the South East Regional Franchise Area 6,486,433 Additional 20% of share capital of Telewest Communications (Cotswolds) Limited 561,050 Additional 0.25% of share capital of Cable London plc 556,717 - ------------------------------------------------------------------------------------------------------------------------------------ 7,604,200 ====================================================================================================================================
CONVERTIBLE PREFERENCE SHARES The convertible preference shares are convertible into fully paid ordinary shares at any time on the basis of one ordinary share for every convertible preference share provided that, immediately following the conversion, the percentage of the issued ordinary share capital of the Company held by members of the public, as defined by the listing rules of the London Stock Exchange, does not fall below 25%. The ordinary shares arising on conversion will rank pari passu in all respects with the ordinary shares then in issue. The holders of the convertible preference shares are entitled to receive a dividend of such amount as is declared and paid in relation to each ordinary share, subject to the dividend to be paid not exceeding 20 pence per share net of any associated tax credit. In the event of a winding-up of the Company or other return of capital, the assets of the Company available for distribution will be paid first to the holders of the convertible preference shares up to the sum of capital paid-up or credited as paid-up unless the right of election upon a winding-up of the Company has been exercised in respect of the convertible preference shares (the "Elected Shares"). If the election has been exercised, the holders of the ordinary shares and the Elected Shares will receive any surplus in accordance with the amount paid-up or credited as paid-up on the shares held. The holders of the convertible shares are not entitled to vote at any general meeting of the Company unless the meeting includes the consideration of a resolution for winding up the Company or a resolution modifying the rights or privileges attaching to the convertible preference shares. EMPLOYEE SHARE SCHEMES Details of the employee share schemes operated by the Company are set out on pages 40 and 41 of the Report of the Remuneration Committee. During the year, options and awards were granted over ordinary shares of the Company in accordance with the rules of the various employee share schemes. At 31 December 1996, taking into account options and awards exercised, cancelled, and lapsed, during the year, the following options to subscribe for the ordinary shares and awards over ordinary shares were outstanding. 24 NOTES 20 CALLED UP SHARE CAPITAL (CONTINUED) TELEWEST EXECUTIVE SHARE OPTION SCHEMES
EXERCISE PRICE NUMBER OF SHARES DATE OF GRANT PER SHARE EXERCISE PERIOD UNDER OPTION - ------------------------------------------------------------------------------------------------------------------------------------ 9 November 1995 154.5p 13/5/98-11/5/2002 5,029,062 9 November 1995 155.5p 13/5/98-11/5/2002 246,474 9 November 1995 171.5p 17/6/98-15/6/2002 1,136,059 9 November 1995 173.5p 17/6/98-8/11/2005 881,445 11 March 1996 141.0p 12/3/99-10/3/2006 3,803,186 11 March 1996 138.0p 12/3/99-10/3/2006 142,626 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL OPTIONS OUTSTANDING AT 31 DECEMBER 1996 11,238,852 ====================================================================================================================================
TELEWEST SHARESAVE OPTION SCHEMES
EXERCISE PRICE NUMBER OF SHARES DATE OF GRANT PER SHARE EXERCISE PERIOD UNDER OPTION - ------------------------------------------------------------------------------------------------------------------------------------ 12 December 1994 150.0p 1/2/2000-31/7/2000 653,522 12 December 1995 134.0p 1/2/2001-31/7/2001 1,258,104 12 December 1996 102.5p 1/2/2000-31/7/2000 2,165,009 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL OPTIONS OUTSTANDING AT 31 DECEMBER 1996 4,076,635 ====================================================================================================================================
The savings contracts associated with the options granted on 12 December 1996 became effective from 1 February 1997. TELEWEST RESTRICTED SHARE SCHEME At 31 December 1996, awards over 2,648,000 Ordinary shares were outstanding. The exercise period of these awards is from 13 January 1998 to 24 July 2006. Of the total shares under award at 31 December 1996, executives had earned 2,300,000 Ordinary shares in respect of services provided to the Group, leaving 348,000 Ordinary shares to be earned through future services. 21 RESERVES
GROUP COMPANY ---------------------------------------------------------- --------------------------- SHARE MERGER OTHER PROFIT SHARE PROFIT PREMIUM RESERVE RESERVES AND LOSS PREMIUM AND LOSS (POUND (POUND (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------------------------------------------------------------------ At 1 January 1996 -- 556,095 270,237 (126,238) -- (16,653) Issue of shares 9,187 729 -- -- 9,187 -- Goodwill written off -- (21,557) -- -- -- -- Loss for the financial year -- -- -- (250,903) -- (38,203) - ------------------------------------------------------------------------------------------------------------------------------------ AT 31 DECEMBER 1996 9,187 535,267 270,237 (377,141) 9,187 (54,856) ====================================================================================================================================
25 22 COMMITMENTS AND CONTINGENCIES (i) CAPITAL COMMITMENTS The amount of capital expenditure authorised by the Group for which no provision has been made in the financial statements is as follows:
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Contracted 13,539 5,616 Authorised but not contracted 526,051 507,380 ================================================================================
The Company has no capital commitments. (ii) LEASING COMMITMENTS Obligations of the Group in respect of finance leases, net of interest, are payable over the following periods.
GROUP COMPANY GROUP 1996 1996 1995 (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Within one year 2,716 145 929 In the second to fifth years inclusive 22,812 3,933 15,498 Over five years 28,862 16,032 13,887 - -------------------------------------------------------------------------------- 54,390 20,110 30,314 ================================================================================
The Company had no obligations in respect of finance leases in 1995. Annual commitments of the Group under operating leases are set out below:
1996 1996 1995 1995 LAND AND LAND AND BUILDINGS OTHER ASSETS BUILDINGS OTHER ASSETS (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Within one year 162 709 78 166 In the second to fifth years inclusive 675 1,167 386 1,177 Over five years 3,092 -- 1,690 28 - -------------------------------------------------------------------------------- 3,929 1,876 2,154 1,371 ================================================================================
The Company has no operating leasing commitments. 23 RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Operating loss (129,251) (83,772) Depreciation and amortisation 129,716 61,525 Increase in stocks (13) (15) Increase in debtors (16,493) (6,080) Increase in creditors 44,520 18,137 - -------------------------------------------------------------------------------- NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 28,479 (10,205) ================================================================================
24 ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
DEBENTURES, FOREIGN SHARE CAPITAL LOANS AND CURRENCY (INCLUDING FINANCE LEASE OPTION PREMIUM) OBLIGATIONS PREMIUM (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Balance at 1 January 1996 141,603 788,716 (85,185) Cash inflows from financing -- 79,003 -- Shares issued for non-cash consideration 9,947 -- -- Amortisation of finance costs -- 61,779 12,815 Valuation adjustment to foreign currency option premium -- -- 53,025 Foreign exchange gain on debentures -- (57,589) -- Debenture issue costs relating to prior year paid during the year -- 829 -- Inception of finance lease contracts -- 25,307 -- - -------------------------------------------------------------------------------- BALANCE AT 31 DECEMBER 1996 151,550 898,045 (19,345) ================================================================================
25 PURCHASE OF SUBSIDIARY UNDERTAKINGS
1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - -------------------------------------------------------------------------------- Tangible fixed assets -- 400,978 Fixed asset investments -- 314 Debtors -- 22,629 Cash at bank and in hand -- 4,159 Creditors -- (45,012) Loans and finance leases -- (158,062) - -------------------------------------------------------------------------------- -- 225,006 Goodwill 19,723 464,872 - -------------------------------------------------------------------------------- 19,723 689,878 ================================================================================ Satisfied by: Issue of shares 9,869 678,174 Cash 9,854 7,391 Accruals for costs incurred -- 4,313 - -------------------------------------------------------------------------------- 19,723 689,878 ================================================================================
26 NOTES 26 ANALYSIS OF THE NET OUTFLOW OF CASH EQUIVALENTS IN RESPECT OF THE PURCHASE OF SUBSIDIARY UNDERTAKINGS
1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - -------------------------------------------------------------------------------------------- Cash consideration (9,854) (7,391) Payment of prior year accrual for acquisition costs (4,313) _ Cash at bank and in hand acquired -- 4,159 - -------------------------------------------------------------------------------------------- Net outflow of cash and cash equivalents (14,167) (3,232) ============================================================================================
27 ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - -------------------------------------------------------------------------------------------- Balance at 1 January 464,818 248,002 Net cash (outflow)/inflow before foreign exchange (386,064) 208,393 Foreign exchange movement on cash 362 8,423 - -------------------------------------------------------------------------------------------- BALANCE AT 31 DECEMBER 79,116 464,818 ============================================================================================
28 RELATED PARTY TRANSACTIONS IDENTITY OF RELEVANT RELATED PARTIES Tele-Communications International, Inc. ("TCI(2)") and US WEST Inc. ("US WEST") are related parties of the Group, in that they own more than 20% of the voting rights of the Group. Cox Communications, Inc. ("COX") and SBC Communications, Inc. ("SBC") are also considered to be related parties of the Group, in that they control substantial portions of the voting rights of the Group and hence are able to exercise influence over its financial and operating policies. Birmingham Cable Corporation Limited and Cable London plc (together "the Associates") are related parties of the Group by virtue of their status as associated companies. NATURE OF TRANSACTIONS Transactions with related parties, other than those described in other notes to the financial statements, were as follows: The Group, in the normal course of providing cable television services, purchases certain of its programming from subsidiaries of TCI(2). Such programming is purchased on commercially-available terms. Total purchases in the year amounted to (pound sterling)6,951,000. The amount due to the subsidiaries of TCI(2) at 31 December 1996 is (pound sterling)1,470,000. The Group has management agreements with TCI(2), US WEST, COX, and SBC under which amounts are paid for employees who have been seconded to the Group. The amounts charged under these agreements during the year and total amounts due to TCI(2), US WEST, COX, and SBC at 31 December 1996 are set out below.
RELATED PARTY AMOUNTS CHARGED UNDER TOTAL AMOUNTS DUE AT MANAGEMENT AGREEMENTS 31 DECEMBER 1996 (POUND STERLING)'000 (POUND STERLING)'000 - -------------------------------------------------------------------------------- TCI(2) 375 810 US WEST 1,810 365 COX 281 600 SBC 93 -- - --------------------------------------------------------------------------------
The Group has entered into consulting agreements with the Associates to provide consulting services relating to telephony operations. Under the agreements, the Group receives an annual fee based upon the revenue of the Associates. The Group also receives a fee for providing switching services to the Associates comprising a fixed element based on a number of switches and a variable element based on a number of lines. Fees received during the year in respect of these services amount to (pound sterling)1,383,000. The amounts due at 31 December 1996 from the Associates in respect of these services were (pound sterling)2,524,000. 27 PRINCIPAL SUBSIDIARY UNDERTAKINGS Except where otherwise stated, the Company owns indirectly 100% of the ordinary share capital of the following principal subsidiary companies and holds indirectly a 100% interest in the following partnerships and joint ventures. The Company also indirectly owns preference shares in the subsidiary companies which are separately disclosed. The subsidiary companies are incorporated in Great Britain and registered in England and Wales except for the Scottish companies, being those companies indicated by *, which are registered in Scotland. The proportion of the ordinary shares held by the Group also represent the proportion of voting rights held by the Group with the exception of Cable Guide Limited in which the Group holds 66.67% of the voting rights. The principal activities of these entities, unless otherwise indicated, are the building and operation of cable television and telephony networks in the United Kingdom. All subsidiary undertakings have been included in the consolidated financial statements. Companies: Cable Adnet Limited Cable Guide Limited (Publisher) (The Company owns indirectly 70% of the ordinary shares and 60% of the cumulative convertible preference shares) Cable Internet Limited Telewest Communications (Central Lancashire) Limited Telewest Communications (Cotswolds) Limited Telewest Communications (Cumbernauld) Limited* Telewest Communications (Dumbarton) Limited* Telewest Communications (Dundee & Perth) Limited* Telewest Communications (East Lothian) Limited* Telewest Communications (Falkirk) Limited* Telewest Communications (Fylde & Wyre) Limited Telewest Communications (Glenrothes) Limited* Telewest Communications Group Limited (Management Company) Telewest Communications (Liverpool) Limited Telewest Communications (London South) Limited (The Company owns indirectly 99.75% of the ordinary shares) Telewest Communications (Midlands) Limited Telewest Communications (Midlands & North West) Limited Telewest Communications (Motherwell) Limited* Telewest Communications Networks Limited (Management Company) (The Company owns directly 100% of the ordinary shares) Telewest Communications (North East) Limited Telewest Communications (North West) Limited Telewest Communications Scotland Holdings Limited* (Holding Company) Telewest Communications (Scotland) Limited* Telewest Communications (South East) Limited Telewest Communications (South Thames Estuary) Limited Telewest Communications (South West) Limited Telewest Communications (Southport) Limited Telewest Communications (St. Helens & Knowsley) Limited Telewest Communications (Telford) Limited Telewest Communications (Wigan) Limited Telewest Communications (Worcester) Limited
PRINCIPAL PLACE PARTNERSHIPS: OF BUSINESS Avon Cable Limited Partnership Bristol Cotswolds Cable Limited Partnership Cheltenham Edinburgh Cable Limited Partnership Edinburgh Estuaries Cable Limited Partnership Basildon London South Cable Partnership Croydon Telewest Communications (North East) Partnership Newcastle Telewest Communications (South East) Partnership Basildon Tyneside Cable Limited Partnership Newcastle United Cable (London South) Limited Partnership Croydon JOINT VENTURES: Avon Cable Limited Partnership and Telewest Communications (South West) Limited Joint Venture Bristol London South Cable Partnership and Telewest Communications (London South) Limited Joint Venture Croydon Telewest Communications (Cotswolds) Venture Cheltenham Telewest Communications (Scotland) Venture Edinburgh
28 PRINCIPAL ASSOCIATED UNDERTAKINGS AND OTHER PARTICIPATING INTERESTS
ASSOCIATED UNDERTAKINGS ISSUED AND FULLY PAID UP PERCENTAGE SHARE CAPITAL SHAREHOLDING - ---------------------------------------------------------------------------------------------------------------------- Birmingham Cable Corporation Limited 51,073,486 ordinary shares of(pound sterling)1 each 27.47 Cable London plc 55,125,690 ordinary shares of 10p each 50.00** London Interconnect Limited 120 ordinary shares of (pound sterling)1 each (equally divided between ordinary A, B, C, D, E and F shares) 16.67 Central Cable Sales Limited 2 ordinary shares of(pound sterling)1 each 50.00
Cable London plc has also issued (pound sterling)45,000,000 of convertible loan stock which is convertible into ordinary shares. The Group held (pound sterling)22,500,000 of the issued loan stock at 31 December 1996. The Group's interest in London Interconnect Limited is included in the consolidated financial statements as an associated undertaking because the Group is in a position to exercise a significant influence over the company. All associated shareholdings operate in the United Kingdom and are incorporated in Great Britain and are registered in England and Wales. The principal activities of Birmingham Cable Corporation Limited and Cable London plc are the building and operation of cable television and telephony networks. The principal activity of London Interconnect Limited is the provision of telephony services. The principal activity of Central Cable Sales Limited is the sale of advertising space on cable television networks. PARTICIPATING INTERESTS
ISSUED AND FULLY PAID UP PERCENTAGE SHARE CAPITAL SHAREHOLDING - ---------------------------------------------------------------------------------------------------------------------- The Cable Corporation Limited 18,225,389 ordinary shares of 25p each 17.45% 1,000,000 ordinary "B" shares of(pound sterling)6.50 each - 2 special shares of 25p each - - ---------------------------------------------------------------------------------------------------------------------- PERCENTAGE SHAREHOLDING OF TOTAL ORDINARY SHARES 16.50% ======================================================================================================================
The principal activities of The Cable Corporation Limited are the building and operation of cable television and telephony networks in the United Kingdom. The Cable Corporation is incorporated in Great Britain and is registered in England and Wales. ** The investment is held directly by Telewest Communications plc. 29 FINANCIAL STATEMENTS UNDER US GAAP Contents 68 Independent auditors' report 69 Consolidated statements of operations for each of the years in the three-year period ended December 31, 1996 70 Consolidated balance sheets at December 31, 1996 and 1995 71 Consolidated statements of cash flows for each of the years in the three-year period ended December 31, 1996 72 Consolidated statement of shareholders' equity for each of the years in the three-year period ended December 31, 1996 73 Notes to the consolidated financial statements 87 Supplementary financial information - five year summary 30 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Telewest Communications plc We have audited the accompanying consolidated balance sheet of Telewest Communications plc and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations and cash flows for each of the years in the three year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements on pages 69 to 86 present fairly, in all material respects, the financial position of Telewest Communications plc and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1996 in conformity with generally accepted accounting principles in the United States of America. KPMG Audit Plc Chartered Accountants Registered Auditors London, England March 11, 1997 31 CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31 1996 1996 1995 1994 $'000 (POUNDS STERLING) (POUNDS STERLING) (POUNDS STERLING) (NOTE 2) '000 '000 '000 - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Cable television 207,572 121,224 64,740 35,875 Telephony - residential 214,060 125,013 57,597 23,471 Telephony - business 59,181 34,562 17,449 8,812 Other (pounds sterling)1,600,(pounds sterling)1,451 and (pounds sterling)1,481 in 1996, 1995 and 1994, respectively, from related parties) 16,210 9,467 4,998 3,869 - ------------------------------------------------------------------------------------------------------------------------------------ 497,023 290,266 144,784 72,027 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING COSTS AND EXPENSES Programming (119,700) (69,906) (32,194) (15,500) Telephony (90,019) (52,572) (29,526) (14,714) Selling, general and administrative (including (pounds sterling)2,560, (pounds sterling)3,257 and (pounds sterling)2,128 in 1996, 1995 and 1994, respectively, to related parties) (286,507) (167,323) (105,388) (60,414) Depreciation (222,113) (129,716) (60,019) (30,320) Amortization of goodwill (44,775) (26,149) (7,854) (1,827) - ------------------------------------------------------------------------------------------------------------------------------------ (763,114) (445,666) (234,981) (122,775) - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING LOSS (266,091) (155,400) (90,197) (50,748) OTHER INCOME/(EXPENSE) Interest income (including (pounds sterling)1,723, (pounds sterling)1,583 and (pounds sterling)465 in 1996, 1995 and 1994, respectively, from related parties) 28,512 16,651 15,645 2,291 Interest expense ((pounds sterling)1,083 in 1994 to related parties) (180,086) (105,172) (26,649) (10,069) Loss on disposal of interest rate swaps - - (8,609) - Unrealized gain on interest rate swaps - - - 1,636 Foreign exchange losses, net (4,860) (2,838) (14,575) (21) Share of net losses of affiliates (27,351) (15,973) (12,777) (8,466) Gain/(loss) on disposal of assets 978 571 (419) 26 Minority interests in (profits)/losses of consolidated subsidiaries, net (308) (180) (16) 39 Other, net - - 82 (25) - ------------------------------------------------------------------------------------------------------------------------------------ LOSS BEFORE INCOME TAXES (449,206) (262,341) (137,515) (65,337) Income tax expense (note 14) (86) (50) (16) - - ------------------------------------------------------------------------------------------------------------------------------------ LOSS BEFORE EXTRAORDINARY GAIN (449,292) (262,391) (137,531) (65,337) Extraordinary gain (note 15) - - - 7,287 - ------------------------------------------------------------------------------------------------------------------------------------ NET LOSS (449,292) (262,391) (137,531) (58,050) ====================================================================================================================================
YEAR ENDED DECEMBER 31 PRO FORMA 1996 1996 1995 1994 $* (POUNDS STERLING)* (POUNDS STERLING)* (POUNDS STERLING)* - ----------------------------------------------------------------------------------------------------------------------------------- LOSS PER ORDINARY SHARE Weighted average number of ordinary shares outstanding 925,425,473 925,425,473 861,424,848 630,756,392 Loss per ordinary share before extraordinary gain (0.49) (0.28) (0.16) (0.10) Extraordinary gain - - - 0.01 - ----------------------------------------------------------------------------------------------------------------------------------- LOSS PER ORDINARY SHARE (0.49) (0.28) (0.16) (0.09) - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements. * Except number of shares 32 CONSOLIDATED BALANCE SHEETS
DECEMBER 31 1996 1996 1995 $'000 (POUNDS STERLING) (POUNDS STERLING) (NOTE 2) '000 '000 - ------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents 135,470 79,116 464,818 Trade receivables (net of allowance for doubtful accounts of (pounds sterling)5,405 and(pounds sterling)4,695) 50,179 29,305 23,123 Other receivables (note 7) 55,468 32,394 25,657 Prepaid expenses 8,849 5,168 6,133 Investments in affiliates, accounted for under the equity method, and related receivables (note 8) 118,868 69,420 80,703 Other investments, at cost 43,948 25,666 20,666 Property and equipment (less accumulated depreciation of (pounds sterling)308,240 and(pounds sterling)182,142) (note 9) 2,478,030 1,447,194 1,063,808 Goodwill (less accumulated amortization of(pounds sterling)37,907 and(pounds sterling)11,758) 841,236 491,290 495,881 Other assets (less accumulated amortization of (pounds sterling)4,162 and (pounds sterling)742) (note 11) 106,825 62,387 108,931 - ------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 3,838,873 2,241,940 2,289,720 ======================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable 80,230 46,855 40,402 Other liabilities (note 12) 325,679 190,200 103,824 Debt (note 13) 1,505,713 879,351 792,265 Capital lease obligations 93,132 54,390 30,314 - ------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 2,004,754 1,170,796 966,805 - ------------------------------------------------------------------------------------------------------------------------ MINORITY INTERESTS 594 347 167 - ------------------------------------------------------------------------------------------------------------------------ SHAREHOLDERS' EQUITY (NOTE 16) Convertible preference shares, 10p par value; 661,000,000 shares authorized and 496,066,708 shares issued and outstanding 84,942 49,607 49,607 Ordinary shares, 10p par value; 2,010,000,000 shares authorized; 927,567,600 and 919,963,400 issued and outstanding in 1996 and 1995, respectively 158,828 92,757 91,996 Additional paid-in capital 2,282,302 1,332,887 1,322,971 Accumulated deficit (688,530) (402,108) (139,717) - ------------------------------------------------------------------------------------------------------------------------ 1,837,542 1,073,143 1,324,857 Ordinary shares held in trust for The Telewest Restricted Share Scheme (note 17) (4,017) (2,346) (2,109) - ------------------------------------------------------------------------------------------------------------------------ TOTAL SHAREHOLDERS' EQUITY 1,833,525 1,070,797 1,322,748 - ------------------------------------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES (NOTE 18) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,838,873 2,241,940 2,289,720 ========================================================================================================================
See accompanying notes to the consolidated financial statements. 33 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 1996 1996 1995 1994 $'000 (POUNDS (POUNDS (POUNDS (NOTE 2) STERLING) STERLING) STERLING) '000 '000 '000 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Loss before extraordinary gain (449,292) (262,391) (137,531) (65,337) Adjustments to reconcile loss before extraordinary gain to net cash provided by/(used in) operating activities: Depreciation 222,113 129,716 60,019 30,320 Amortization of goodwill 44,775 26,149 7,854 1,827 Amortization of deferred financing costs and issue discount on senior discount debentures 126,888 74,104 16,605 - Accrued interest on senior debentures - - 5,451 - Unrealized loss on foreign currency translation 4,860 2,838 14,575 - Loss on disposal of interest rate swaps - - 8,609 - Unrealized gain on interest rate swaps - - - (1,636) Share of losses of affiliates 27,351 15,973 12,777 8,466 (Gain)/loss on disposals of assets (978) (571) 419 (26) Minority interests in profit/(loss) 308 180 16 (39) Changes in operating assets and liabilities, net of effect of acquisition of subsidiaries: Change in receivables (27,239) (15,908) (5,282) (8,102) Change in prepaid expenses 1,632 953 (3,367) 1,004 Change in accounts payable (7,834) (4,575) (5,603) 15,293 Change in other liabilities 88,471 51,668 19,206 9,067 Other - - (356) - - ---------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 31,055 18,136 (6,608) (9,163) - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for property and equipment (795,136) (464,367) (254,453) (202,683) Cash paid for acquisition of subsidiaries (24,258) (14,167) (3,232) (236) Additional investments in and loans to affiliates (4,671) (2,728) (9,143) (23,761) Additions to other investments (8,562) (5,000) - - Proceeds from disposals of assets 5,238 3,059 688 294 Other investing activities - - 335 (5,505) - ---------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (827,389) (483,203) (265,805) (231,891) - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash paid for credit facility arrangement costs (31,506) (18,400) - - Proceeds from debenture issue - - 754,812 - Cash paid for foreign currency option - - (88,070) - Repayment of borrowings (1,604) (937) (157,930) (219,700) Cash paid for debenture issue costs (1,420) (829) (20,574) - Cash paid for share issue costs - - (6,141) (28,543) Proceeds from share issues - - - 511,800 Proceeds from borrowings 171,915 100,400 - 174,200 Capital element of finance lease repayments (2,108) (1,231) (1,291) (210) Net contributions from Joint Venturers and minorities - - - 44,995 - ---------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 135,277 79,003 480,806 482,542 - ---------------------------------------------------------------------------------------------------------------------- NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (661,057) (386,064) 208,393 241,488 Effect of exchange rate changes on cash and cash equivalents 620 362 8,423 - Cash and cash equivalents at beginning of year 795,907 464,818 248,002 6,514 - ---------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR 135,470 79,116 464,818 248,002 ======================================================================================================================
See accompanying notes to the consolidated financial statements. 34 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NET ASSETS OF THE JOINT VENTURE (POUNDS STERLING)'000 (SEE NOTE 1) - ---------------------------------------------------------------------------------------------------------------------- JOINT VENTURE: Period from January 1 to November 22, 1994 Balance at January 1, 1994 311,695 Capital contribution 121,873 Repayment of the Joint Venturers' capital accounts (75,700) Net loss (55,864) - ---------------------------------------------------------------------------------------------------------------------- Balance at November 22, 1994 302,004 ======================================================================================================================
On November 22, 1994 the net assets of Joint Venture were contributed to the Company, as described in Note 1 to the consolidated financial statements. The contribution appears as an increase in additional paid-in capital in the following table.
CONVERTIBLE ADDITIONAL PREFERENCE ORDINARY SHARES HELD PAID-IN ACCUMULATED SHARES SHARES IN TRUST CAPITAL DEFICIT TOTAL (POUNDS (POUNDS (POUNDS (POUNDS (POUNDS (POUNDS (STERLING) STERLING) STERLING) STERLING) (STERLING) (STERLING) '000 '000 '000 '000 '000 '000 - ---------------------------------------------------------------------------------------------------------------------- COMPANY: Shares issued during the year 15,300 84,824 - 384,272 - 484,396 Ordinary shares held in trust for the Telewest Restricted Share Scheme - - (7,280) - - (7,280) Contribution of the Joint Venture to the Company on November 22, 1994 - - - 302,004 - 302,004 Net loss - - - - (2,186) (2,186) - ---------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1994 15,300 84,824 (7,280) 686,276 (2,186) 776,934 Conversion of ordinary shares into convertible preference shares 11,227 (11,227) - - - - Shares issued in connection with the acquisition of TCMN (see note 5) 23,080 18,399 - 636,695 - 678,174 Accrued employee compensation relating to the Telewest Restricted Share Scheme - - 5,171 - - 5,171 Net loss - - - - (137,531) (137,531) - ---------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1995 49,607 91,996 (2,109) 1,322,971 (139,717) 1,322,748 Ordinary shares issued _ 761 - 9,916 - 10,677 Accrued employee compensation relating to the Telewest Restricted Share Scheme - - (237) - - (237) Net loss - - - - (262,391) (262,391) - ---------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1996 49,607 92,757 (2,346) 1,332,887 (402,108) 1,070,797 ======================================================================================================================
See accompanying notes to the consolidated financial statements. 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS years ended December 31, 1996 and 1995 1 ORGANIZATION AND HISTORY Telewest Communications plc ("the Company") is a cable television and telephony operator which offers these services to business and residential customers in the United Kingdom ("UK"). The Company derives its cable television revenues from installation fees, monthly basic and premium service fees and advertising charges. The Company derives its telephony revenues from connection charges, monthly line rentals, call charges, special residential service charges and interconnection fees payable by other operators. The cable television and telephony services account for approximately 42% and 55%, respectively, of the Company's revenue. This revenue is predominantly derived from residential, rather than business, customers. The Company was incorporated on October 20, 1994 under the laws of England and Wales in preparation for the October 2, 1995 internal reorganization of Telewest Communications Cable Limited ("TCCL"), then called TeleWest Communications plc, and its subsidiaries whereby the entire issued share capital of TCCL was transferred to the Company in exchange for fully paid up shares of the Company. TCCL had traded since November 22, 1994 when affiliates of Tele-Communications, Inc. (the "TCI Affiliates") and affiliates of US WEST, Inc. (the "US WEST Affiliates") contributed their UK cable interests to TCCL (the "Contribution"). These interests were previously held by the TCI Affiliates and US WEST Affiliates through TCI/US West Cable Communications Group, a general partnership. TCI/US WEST Cable Communications Group and its subsidiaries collectively are referred to herein as the "Joint Venture" and the TCI Affiliates and US WEST Affiliates collectively are referred to herein as the "Joint Venturers". 2 BASIS OF PREPARATION The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company's historical shareholders' equity for the periods prior to November 22, 1994, is the excess of the Joint Venture's assets over the Joint Venture's liabilities and represents the historical cost of the capital contributions made by the Joint Venturers less the accumulated deficit arising from the Joint Venture's operations. The economic environment and currency in which the Company operates is the UK and hence its reporting currency is Pounds Sterling (pounds sterling). Certain financial information for the year ended December 31, 1996 has been translated into US Dollars, with such US Dollar amounts being unaudited and presented solely for the convenience of the reader, at the rate of $1.7123 = (pounds sterling)1.00, the Noon Buying Rate of the Federal Reserve Bank of New York on December 31, 1996. The presentation of the US Dollar amounts should not be construed as a representation that the Pounds Sterling amounts could be so converted into US Dollars at the rate indicated or at any other rate. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and those of all majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. All acquisitions have been accounted for under the purchase method of accounting. Under this method, the results of subsidiaries and affiliates acquired in the year are included in the consolidated statement of operations from the date of acquisition. Goodwill arising on consolidation (representing the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired) is amortized over the acquisition's useful life or over a maximum period of 40 years. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over its remaining life can be recovered through projected undiscounted future operating cash flows of the acquired operations. The assessment of the recoverability of goodwill will be impacted if projected future operating cash flows are not achieved. The amount of goodwill impairment, if any, is measured based on the projected discounted future operating cash flows using a discount rate reflecting the Company's cost of funds. CASH AND CASH EQUIVALENTS Cash and cash equivalents include highly-liquid investments with original maturities of three months or less that are readily convertible into cash. FINANCIAL INSTRUMENTS The Company uses foreign currency option contracts which permit, but do not require, the Company to exchange foreign currencies at a future date with another party at a contracted exchange rate. The Company also enters into combined foreign currency and interest rate swap contracts ("Foreign Currency Swaps"). Such contracts are used to hedge against adverse changes in foreign currency exchange rates associated with obligations denominated in foreign currency. 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The foreign currency option and Foreign Currency Swaps are recorded on the balance sheet in other assets or other liabilities at their fair value at the reporting period with changes in their fair value during the reporting period being reported as part of the foreign exchange gain or loss in the statement of operations. Such gains and losses are offset against foreign exchange gains and losses on the obligations denominated in foreign currencies which have been hedged. Interest rate swap agreements which are used to manage interest rate risk on the Company's borrowings are accounted for using the accruals method. Net income or expense resulting from the differential between exchanging floating and fixed rate interest payments is recorded on an accruals basis. To the extent that the interest rate swap agreements are delayed starting, net income or expense is not recognized until the effective date of the agreement. Other interest rate swaps which are held as trading assets are recorded on the balance sheet at their fair value at the end of each reporting period with changes in their fair value being recorded as gains and losses in the statement of operations. INVESTMENTS Investments in partnerships, joint ventures and subsidiaries in which the Company's voting interest is 20% to 50%, and others where the Company has significant influence, are accounted for using the equity method. Investments which do not have a readily determinable fair value, in which the Company's voting interest is less than 20%, and in which the Company does not have significant influence, are carried at cost and written down to the extent that there has been an other-than-temporary diminution in value. ADVERTISING COSTS Advertising costs are expensed as incurred. The amount of advertising costs expensed was (pound sterling)24,846,000, (pound sterling)10,246,000, and (pound sterling)4,313,000 for the years ended December 31, 1996, 1995, and 1994, respectively. PROPERTY AND EQUIPMENT Property and equipment is stated at cost, including the historical carryover basis cost from the Contribution. Except during the prematurity period as described below, depreciation is provided to write off the cost, less estimated residual value, of property and equipment by equal instalments over their estimated useful economic lives as follows: Freehold and long leasehold buildings 50 years Cable and ducting 20 years Electronic equipment - System electronics 8 years - Switching equipment 8 years - Subscriber electronics 5 years - Headend, studio and playback facilities 5 years Other equipment - Office furniture and fittings 5 years - Motor vehicles 4 years
During the prematurity period, depreciation of cable and ducting and system electronics is charged monthly to write off the estimated cost at the end of the prematurity phase over a useful life of 20 and 8 years, respectively. In accordance with Statement of Financial Accounting Standard ("SFAS") No 51, "Financial Reporting by Cable Television Companies", the monthly charge is scaled down by a ratio of average customers in the current period to the estimated customer base at the end of the prematurity period. The prematurity period covers the period between connecting the first customer and substantial completion of the network. Preconstruction costs which are included within cable and ducting are amortized over the life of the franchise from the date of the first customer. The Company accounts for costs, expenses and revenues applicable to the construction and operation of its cable systems under SFAS No 51. The estimated useful lives of cable and ducting and systems electronics were reassessed with effect from January 1, 1996, and were changed from 25-30 years and 10 years to 20 years and 8 years, respectively. The net book value of these assets are being written-off over their revised estimated remaining lives. FRANCHISE COSTS Expenditure incurred on successful applications for franchise licenses is included in property and equipment and is amortized over the remaining life of the original franchise term. Costs relating to unsuccessful applications are charged to the statement of operations. DEFERRED FINANCING COSTS Costs incurred in raising debt are deferred and recorded on the balance sheet in other assets. The costs are amortized to the consolidated statement of operations at a constant rate to the carrying value of the debt over the life of the obligation. MINORITY INTERESTS Recognition of the minority interests' share of losses of consolidated subsidiaries is limited to the amount of such minority interests' allocable portion of the equity of those consolidated subsidiaries. FOREIGN CURRENCIES Transactions in foreign currencies are recorded using the rate of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the statement of operations. REVENUE RECOGNITION Revenue is recognized as services are delivered. Other revenues include connection fees which are recognized in the period of connection to the extent that the fee is offset by direct selling costs. The remainder is recognized over the estimated average period that customers are expected to remain connected to the system. 37 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PENSION COSTS The Company does not have a defined-benefit pension plan but operates a defined-contribution scheme or contributes up to specified limits to the third-party scheme of the employee's choice. The amount included in losses in 1996, 1995 and 1994 of (pound sterling)2,580,000, (pound sterling)1,538,000, and (pound sterling)839,000, respectively, represents the contributions payable to the selected schemes in respect of the relevant accounting periods. INCOME TAXES Prior to November 22, 1994 no provision had been made for income tax expense or benefit in the accompanying financial statements as the earnings or losses of the Joint Venture were reported in the respective income tax returns of the individual Joint Venturers. Following the reorganization effective on November 22, 1994, the Company became subject to UK taxation and adopted SFAS No 109, "Accounting for Income Taxes". The adoption of SFAS No 109 does not give rise to any cumulative adjustment to be made in the 1994 consolidated statement of operations. Under the asset and liability method of SFAS No 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered. SHARE-BASED COMPENSATION SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require, companies to record compensation cost for share-based employee compensation plans at fair value. The Company has chosen to continue to account for share-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Accordingly, compensation cost for share options is measured as the excess, if any, of the quoted market price of the Company's shares at the date of the grant over the amount an employee must pay to acquire the shares. Shares purchased by trustees in connection with the Telewest Restricted Share Scheme, are valued at the market price on the date on which they are purchased and are reflected as a reduction of shareholders' equity in the balance sheet. This equity account is reduced when the shares are awarded to employees based on the original cost of the shares to the trustees. The value of awards of ordinary shares to be made to employees in future years is charged to the statement of operations to the extent that the awards have been awarded to and earned by employees in the current accounting period. The value of shares which have been awarded to, but have not been earned by employees, is included as deferred compensation expense within other assets. LOSS PER ORDINARY SHARE Loss per ordinary share is based on the weighted average number of ordinary shares outstanding during the year. Ordinary share equivalents are not included in the computation as their effect would be to decrease the loss per share. The pro forma loss per ordinary share calculated for the year ended December 31, 1994 assumes that ordinary shares issued to the Joint Venturers in return for the Contribution had been outstanding for the entire year. RECENTLY ISSUED ACCOUNTING STANDARDS. In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". The statement establishes, among other things, new criteria for determining whether a transfer of financial assets in exchange for cash or other consideration should be accounted for as a sale or as a pledge of collateral in a secured borrowing. SFAS No. 125 also establishes new accounting requirements and servicing of financial assets and extinguishment of liabilities occurring after December 31,1996. In December 1996, SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125", was issued. SFAS No. 127 defers for one year the effective date of certain requirements of SFAS No. 125. SFAS No. 125 is not expected to have a material impact on the financial position or results of operations of the Company. Statement of Position ("SOP") No. 96-1 "Environmental Remediation Liabilities", was issued in October 1996. This statement provides authoritative guidance on specific accounting issues that are present in the recognition, measurement, display, and disclosure of environment remediation liabilities. The provisions of this statement are effective for fiscal years beginning after December 15, 1996. SOP 96-1 is not expected to have a material impact on the financial position or results of operations of the Company. 4 FINANCIAL INSTRUMENTS FOREIGN CURRENCY OPTION CONTRACT At December 31, 1996, the Company held a Pounds Sterling put option to purchase US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange rates on the principal amount at maturity of its US Dollar-denominated Senior Discount Debentures due 2007 ("Senior Discount Debentures"). The expiration date of this option contract is September 28, 2000. The put option has a strike price at expiration of (pound sterling)1.00 = US$1.4520. The foreign currency option has been included in other assets at its fair value on December 31, 1996. 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4 FINANCIAL INSTRUMENTS (CONTINUED) FOREIGN CURRENCY SWAP The Company has entered into a Foreign Currency Swap to hedge its exposure to adverse fluctuations in exchange rates on the principal amount of its US Dollar-denominated Senior Debentures due 2006 ("Senior Debentures"). The terms of the contract provided for the Company to make an initial exchange of principal of US$300,000,000 in exchange for (pound sterling)196,078,000. On expiration on October 1, 2000, the initial principal amounts will be re-exchanged. The interest element of the Foreign Currency Swap requires the Company to make Pounds Sterling fixed-rate interest payments and to receive US Dollar fixed-rate interest payments on the initial exchange amounts on a semi-annual basis. The Foreign Currency Swap contract has been included in other liabilities at its fair value on December 31, 1996. INTEREST RATE SWAPS The Company has also entered into certain delayed-starting interest rate swap agreements in order to manage interest rate risk on its senior secured credit facility ("Senior Secured Facility"). The effective dates of the swap agreements are January 2, 1997 and March 31, 1997, and the agreements mature on December 31, 2001 and March 28, 2002. The aggregate notional principal amount of the swaps adjusts upwards on a semi-annual basis to a maximum of (pound sterling)750 million. In accordance with the swap agreements, the Company receives interest at the six month LIBOR rate and pays a fixed interest rate in the range of 7.835 - 7.975%. FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 119 "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments" requires disclosure of an estimate of the fair values of certain financial instruments. SFAS No. 119 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale. Fair value estimates are made at a specific point in time, based upon relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined precisely. Changes in assumptions could significantly affect the estimates. At December 31, 1996, the Company's significant financial instruments include cash and cash equivalents, trade receivables, a foreign currency option contract, a Foreign Currency Swap, interest rate swap agreements, trade payables and long-term borrowings. The following table summarizes the fair value of the foreign currency option contract, the Foreign Currency Swap, the interest rate swap agreements, the Senior Discount Debentures and the Senior Debentures. The fair value of the other financial instruments held by the Company approximates their recorded carrying amount due to the short maturity of these instruments and these instruments are not presented in the following table.
AT DECEMBER 31,1996 AT DECEMBER 31,1995 CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE (POUND STERLING) (POUND STERLING) (POUND STERLING) (POUND STERLING) '000 '000 '000 '000 - ------------------------------------------------------------------------------------------ Assets: Foreign currency option contract 25,828 25,828 85,742 85,742 Liabilities: Interest rate swap agreements - 4,776 - - Foreign Currency Swap 26,481 26,481 3,983 3,983 Senior Discount Debentures 600,799 621,367 595,266 601,222 Senior Debentures 175,203 175,582 193,113 196,975 =========================================================================================
The estimated fair value of the foreign currency option contract, the interest rate swap agreements and the Foreign Currency Swap are based on quotations received from independent, third party financial institutions and represent the net amount receivable or payable to terminate the position, taking into consideration market rates and counterparty credit risk. The estimated fair value of the Senior Discount Debentures and the Senior Debentures are also based on quotations from independent third party financial institutions and are based on discounting the future cash flows to net present values using appropriate market interest rates prevailing at the year end. MARKET RISK AND CONCENTRATIONS OF CREDIT RISK Market risk is the sensitivity of the value of the financial instruments to changes in related currency and interest rates. Generally, the Company is not exposed to such market risk because gains and losses on the financial instruments are offset by gains and losses on the underlying assets and liabilities. The Company may be exposed to potential losses due to the credit risk of non-performance by the counterparties to its foreign currency option, interest rate swap agreements and Foreign Currency Swap contract, however such losses are not anticipated as these counterparties are major international financial institutions. Temporary cash investments also potentially expose the Company to concentrations of credit risk, as defined by SFAS No. 105 "Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risks". The Company places its temporary cash investments with major international financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. At December 31, 1996, the Company had no significant concentration of credit risk. 39 5 BUSINESS COMBINATIONS On January 10, 1996, the Company acquired the entire issued share capital of Telewest Communications (Worcester) Limited, then called Bell Cablemedia (Worcester) Limited and the owner of the Worcester cable franchise, for cash consideration of (pound sterling)9,849,000. Telewest Communications (Worcester) Limited was otherwise a dormant company with net assets of (pound sterling)2 representing its called up share capital. This acquisition has been accounted for under the purchase method of accounting. The goodwill arising on acquisition was (pound sterling)9,848,998 and is being amortized on a straight-line basis over 20 years. During the year, the Company made various other minor acquisitions, largely for share consideration. The goodwill arising on these acquisitions was (pound sterling)11,708,000 and is being amortized on a straight-line basis over 20 years. On October 3, 1995, the Company acquired the entire share capital of Telewest Communications (Midlands & North West) Limited ("TCMN"), then called SBC CableComms (UK), a company which holds cable television and telephony interests in the UK, from an affiliate of Cox Communications, Inc. and affiliates of SBC Communications, Inc., in exchange for an aggregate of 183,994,960 ordinary shares of 10 pence each and 230,790,208 convertible preference shares of 10 pence each. The value attributable to the shares issued was (pound sterling)1.635 per share, being the market price of the shares on June 8, 1995, the day the terms of the acquisition were agreed to and announced. The fair value of the share consideration using this share price was (pound sterling)678,174,000. The aggregate cost of acquisition was (pound sterling)689,878,000 including payment of expenses relating to the acquisition. This acquisition has been accounted for under the purchase method of accounting. The goodwill arising on acquisition is (pound sterling)464,872,000 and is being amortized on a straight-line basis over 20 years. The operating results of these acquisitions are included in the Company's consolidated statement of operations from their respective dates of acquisition. The following unaudited pro forma information presents the consolidated results of operations of the Company as if the acquisitions had occurred at the beginning of 1995, after giving effect to the amortization of goodwill arising as a result of each of the acquisitions:
1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - ------------------------------------------------------------------------------ Revenue 290,266 191,195 Net loss (262,608) (189,225) ==============================================================================
The above unaudited pro forma financial information is presented for information purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the dates indicated above, nor is it indicative of future results. 6 SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS Cash paid for interest was (pound sterling)25,795,000, (pound sterling)6,041,000 and (pound sterling)8,013,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Significant non-cash investing activities of the Company are described below. The amounts stated for 1996 represent the purchase of former minority shareholders' interests in certain UK cable interests held by the Company. The amounts stated for 1995 represent the purchase of TCMN for largely share consideration as described in Note 5 to the consolidated financial statements. The amounts stated for 1994 represent the contribution of UK cable interests to the Company by the Joint Venturers.
1996 1995 1994 (POUND STERLING)'000 (POUND STERLING)'000 (POUND STERLING)'000 - -------------------------------------------------------------------------------------------------- Purchase/contribution of cable interests: Assets -- 428,080 3,967 Liabilities assumed -- (45,144) (2,744) Debt assumed -- (157,930) -- Minority interest in subsidiaries -- -- (44) - ------------------------------------------------------------------------------------------------- Net assets acquired/ contributed -- 225,006 1,179 Goodwill on acquisition 9,874 464,872 -- - ------------------------------------------------------------------------------------------------- 9,874 689,878 1,179 ================================================================================================= Share consideration/ capital contribution 9,869 678,174 1,179 Costs of acquisition 5 11,704 -- - -------------------------------------------------------------------------------------------------- 9,874 689,878 1,179 ==================================================================================================
The Company entered into finance lease arrangements for switching equipment and other equipment with a total capital value at the beginning of the lease of (pound sterling)25,307,000, (pound sterling)16,920,000 and (pound sterling)6,820,000 during the years ended December 31, 1996, 1995 and 1994, respectively. 7 OTHER RECEIVABLES
AT DECEMBER 31 1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - ---------------------------------------------------------------------------- Value Added Tax refund 10,633 5,145 Interconnection receivables 3,865 3,019 Interest receivable 63 3,341 Accrued income 4,356 3,311 Recoverable expenses 5,714 2,808 Other 7,763 8,033 - ---------------------------------------------------------------------------- 32,394 25,657 ============================================================================
40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8 INVESTMENTS The Company has investments in affiliates accounted for under the equity method at December 31, 1996 and 1995 as follows:
PERCENTAGE OWNERSHIP AT DECEMBER 31 1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - --------------------------------------------------------------- Cable London plc 60.00% 49.00% Birmingham Cable Corporation Limited 27.47% 27.47% London Interconnect Limited 16.67% 16.67% Central Cable Sales Limited 50.00% 50.00% ===============================================================
The Company has accounted for its investment in London Interconnect Limited under the equity method because it is in a position to exercise a significant influence over London Interconnect Limited. Summarized financial information for such affiliates which operate principally in the cable television and telephony industries is as follows: Combined financial position
AT DECEMBER 31 1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - ------------------------------------------------------------- Property and equipment, net 391,189 311,265 Intangible assets, net 3,845 4,644 Other assets, net 105,475 149,786 - ------------------------------------------------------------- Total assets 500,503 465,695 - ------------------------------------------------------------- Debt 281,500 247,653 Other liabilities 91,947 50,268 Owners' equity 127,056 167,774 - ------------------------------------------------------------- Total liabilities and equity 500,503 465,695 =============================================================
Combined operations
YEAR ENDED DECEMBER 31 1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - ------------------------------------------------------------- Revenue 98,329 70,016 Operating expenses (124,358) (99,184) - ------------------------------------------------------------- Operating loss (26,029) (29,168) Interest expense (15,945) (4,615) - ------------------------------------------------------------- Net loss (41,974) (33,783) =============================================================
The Company's investments in affiliates are comprised as follows:
AT DECEMBER 31 1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - ------------------------------------------------------------- Loans 29,089 24,593 Share of net assets 40,331 56,110 - ------------------------------------------------------------- 69,420 80,703 - -------------------------------------------------------------
Any excess of the purchase cost over the value of the net assets acquired is included in goodwill and amortized over 20 years on a straight-line basis. 41 9 PROPERTY AND EQUIPMENT
CABLE AND ELECTRONIC OTHER LAND BUILDINGS DUCTING EQUIPMENT EQUIPMENT TOTAL (POUND (POUND (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------------------------------------------------------ ACQUISITION COSTS Balance at January 1, 1996 4,223 36,005 766,866 359,617 79,239 1,245,950 Additions -- 9,951 335,844 130,783 39,012 515,590 Disposals -- -- (749) (565) (4,792) (6,106) - ------------------------------------------------------------------------------------------------------------------------ Balance at December 31,1996 4,223 45,956 1,101,961 489,835 113,459 1,755,434 - ------------------------------------------------------------------------------------------------------------------------ ACCUMULATED DEPRECIATION Balance at January 1, 1996 -- 4,920 74,532 70,810 31,880 182,142 Charge for year -- 2,458 47,374 60,220 19,664 129,716 Disposals -- -- (725) (547) (2,346) (3,618) - ------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1996 -- 7,378 121,181 130,483 49,198 308,240 - ------------------------------------------------------------------------------------------------------------------------ 1996 NET BOOK VALUE 4,223 38,578 980,780 359,352 64,261 1,447,194 ======================================================================================================================== ACQUISITION COSTS Balance at January 1, 1995 4,055 16,643 321,208 149,652 30,575 522,133 On acquisition of TCMN 168 14,551 284,670 131,682 25,681 456,752 Additions -- 4,811 161,439 78,729 24,097 269,076 Disposals -- -- (451) (446) (1,114) (2,011) - ------------------------------------------------------------------------------------------------------------------------ Balance at December 31,1995 4,223 36,005 766,866 359,617 79,239 1,245,950 - ------------------------------------------------------------------------------------------------------------------------ ACCUMULATED DEPRECIATION balance at January 1,1995 -- 2,106 25,926 28,040 11,218 67,290 On acquisition of TCMN -- 833 26,201 17,080 11,660 55,774 Charge for year -- 1,981 22,507 25,791 9,740 60,019 Disposals -- -- (102) (101) (738) (941) - ------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 -- 4,920 74,532 70,810 31,880 182,142 - ------------------------------------------------------------------------------------------------------------------------ 1995 NET BOOK VALUE 4,223 31,085 692,334 288,807 47,359 1,063,808 ========================================================================================================================
Cable and ducting consists principally of civil engineering and FIBRE optic costs. In addition, cable and ducting includes net book value of preconstruction and franchise costs of (pound)13,220,000 and (pound)14,388,000 as of December 31, 1996 and 1995, respectively. Electronic equipment includes the Company's switching, headend and converter equipment. Other equipment consists principally of motor vehicles, office furniture and fixtures and leasehold improvements. 10 VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS CHARGED TO BALANCE AT ACQUISITION COSTS AND OTHER BALANCE AT JANUARY 1 OF TCMN EXPENSES ACCOUNTS DEDUCTIONS DECEMBER 31 (POUND (POUND (POUND (POUND (POUND (POUND STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------------------------------------------------------- 1996 Allowance for doubtful accounts 4,695 -- 9,020 -- (8,310) 5,405 ========================================================================================================================= 1995 Allowance for doubtful accounts 1,736 1,063 5,920 -- (4,024) 4,695 ========================================================================================================================= 1994 Allowance for doubtful accounts 577 -- 3,392 26 (2,259) 1,736 =========================================================================================================================
42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11 OTHER ASSETS The components of other assets, net of amortization, are as follows:
AT DECEMBER 31 1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------- Deferred financing costs of debentures 17,510 20,716 Deferred financing costs of Senior Secured Facility 18,186 -- Foreign currency option contract 25,828 85,742 Other 863 2,473 - ------------------------------------------------------------------------- 62,387 108,931 =========================================================================
12 OTHER LIABILITIES Other liabilities are summarized as follows:
AT DECEMBER 31 1996 1995 (POUND (POUND STERLING)'000 STERLING)'000 - ------------------------------------------------------------------------- Amounts due to affiliated or other related parties 1,901 2,052 Accrued interest 8,921 5,740 Accrued construction costs 36,397 14,859 Accrued expenses and deferred income 82,938 58,507 Foreign Currency Swap 26,481 3,983 Other liabilities 33,562 18,683 - ------------------------------------------------------------------------ 190,200 103,824 ========================================================================
13 DEBT Debt is summarized as follows at December 31, 1996 and 1995:
WEIGHTED AVERAGE 1996 1995 INTEREST RATE (POUND (POUND 1996 1995 STERLING)'000 STERLING)'000 - ---------------------------------------------------------------------------------- Senior Debentures 9.625% 9.625% 175,203 193,113 Senior Discount Debentures 11.000% 11.000% 600,799 595,266 Senior Secured Facility 8.281% -- 100,000 -- Other debt 7.790% 8.450% 3,349 3,886 - ---------------------------------------------------------------------------------- 879,351 792,265 ==================================================================================
SENIOR DEBENTURES In October 1995, the Company issued US$300,000,000 principal amount of Senior Debentures with a yield to maturity of 9.625%. The cash consideration received at the date of issue was (pound)188,703,000. The Senior Debentures mature on October 1, 2006. Interest on the Senior Debentures accrues semi-annually and is payable in arrears. The Senior Debentures are redeemable, in whole or in part, at the option of the Company at any time on or after October 1, 2000 at the redemption price of 104.813% of the principal amount during the year commencing October 1, 2000, 102.406% of the principal amount during the year commencing October 1, 2001, and thereafter at 100% of the principal amount plus accrued and unpaid interest. The Senior Debentures and the Senior Discount Debentures, which are described below, were issued to finance general working capital, capital expenditure, foreign currency swap and options to hedge against adverse fluctuations in exchange rates, and additional investments in affiliated companies. A portion of the net proceeds of the issue also was used to repay the (pound)157,930,000 indebtedness outstanding under the loan facility held by TCMN at the date that it was acquired by the Company. The indenture under which the Senior Debentures were issued contains various covenants which, among other things, restrict the ability of the Company to incur additional indebtedness, pay dividends, create certain liens, enter into certain transactions with shareholders or affiliates, or sell certain assets. The Company was in compliance with the convenants at December 31, 1996. The Company has entered into a Foreign Currency Swap to hedge its exposure to adverse fluctuations in exchange rates on the principal amount which will be outstanding on October 1, 2000, the earliest redemption date, and the associated interest payments of the Senior Debentures. The terms of the Foreign Currency Swap are described in Note 4 to the consolidated financial statements. The Senior Debentures are unsecured liabilities of the Company. SENIOR DISCOUNT DEBENTURES In October 1995, the Company issued US$1,536,413,000 principal amount at maturity of Senior Discount Debentures with a yield to maturity of 11%. The cash consideration received at the date of issue was (pound)566,109,000 (US$900,000,000). At December 31, 1996, the unamortized portion of the discount on issue was (pound)296,482,000 (US$507,665,000). The Senior Discount Debentures mature on October 1, 2007. Interest on the Senior Discount Debentures accrues semi-annually. Cash interest will not accrue on the Senior Discount Debentures prior to October 1, 2000 and is thereafter payable in arrears on April 1 and October 1 of each year at a rate of 11% per annum. The Senior Discount Debentures are redeemable, in whole or in part, at the option of the Company at any time on or after October 1, 2000 at the redemption price of 100% of the principal amount plus accrued and unpaid interest. The indenture under which the Senior Discount Debentures were issued contains various covenants as set out for the Senior Debentures above and the Company was in compliance with such covenants at December 31, 1996. 43 13 DEBT (CONTINUED) The Company has purchased a five year pound sterling put option to purchase US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange rates on the principal amount which will be outstanding on October 1, 2000, the earliest redemption date, of the Senior Discount Debentures. The terms of the foreign currency option contract are described in Note 4 to the consolidated financial statements. The Senior Discount Debentures are unsecured liabilities of the Company. SENIOR SECURED FACILITY During the year, a subsidiary of the Company entered into a senior secured credit facility (the "Senior Secured Facility") with a syndicate of banks. The facility is available to finance the capital expenditure, working capital requirements and other permitted related activities involving the construction and operation of all the Company's owned and operated franchises, to pay cash interest on the Company's unsecured debentures, to fund the repayment of existing secured borrowings in respect of the London South and South West Regional Franchise Areas, to fund loans to or investments in affiliated companies, to bid for or purchase, and subsequently construct, licenses or franchises which may become available and to refinance advances and the payment of interest, fees, and expenses in respect of the Senior Secured Facility. The facility is divided into two tranches: the first portion (Tranche A) is available on a revolving basis for up to (pound sterling)300 million, reducing to (pound sterling)100 million by June 30, 1998 with full repayment by December 31, 1998; the second portion (Tranche B) is available on a revolving basis concurrently with Tranche A for an amount up to 6.5 times the trailing, rolling six month annualized consolidated net operating cash flow, gradually reducing throughout the period of the facility to 4 times by January 1, 2000. Thereafter, the amount outstanding under the Tranche B facility converts to a term loan amortizing over 5 years. The aggregate drawing at any time under both tranches cannot exceed (pound sterling)1.2 billion. At December 31, 1996, (pound sterling)100,000,000 was outstanding under Tranche A. During the year, the Company paid (pound sterling)2,487,000 for commitment fees relating to the unused portion of the facility. Borrowings under the facility are secured by the assets of the Company, including the partnership interests and shares of subsidiaries, and bear interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875% above LIBOR (depending on the ratio of borrowings to the trailing, rolling six month annualized consolidated net operating cash flow) for Tranche B. In September 1996, the Company entered into certain delayed-starting interest rate swap agreements in order to manage interest rate risk on the Senior Secured Facility. The terms of the swap agreements are described in Note 4 to the consolidated financial statements. The Company's ability to borrow under the facility is subject to, among other things, its compliance with the financial and other covenants and borrowing conditions contained therein. The Company was in compliance with the covenants at December 31, 1996. OTHER DEBT Other debt is represented by property loans which are secured on freehold land and buildings held by the Company which mature in 1997. The property loans bear interest at a rate of between 1.00% and 1.75% above LIBOR. 14 INCOME TAXES As discussed in Note 3 to the consolidated financial statements, the Company has adopted SFAS No 109 as of November 22, 1994. The adoption of this standard has no cumulative effect to be reported in the 1994 consolidated statement of operations. Loss before income taxes is solely attributable to the UK. The provisions for income taxes follow:
YEAR ENDED DECEMBER 31 1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - ------------------------------------------------------------------------ CURRENTLY PAYABLE 50 16 ========================================================================
A reconciliation of income taxes determined using the statutory UK rate of 33% to the effective rate of income tax is as follows:
YEAR ENDED DECEMBER 31 1996 1995 % % - -------------------------------------------------------- Corporate tax at UK statutory rates (33) (33) Permanent differences 1 3 Valuation allowance and other temporary differences 30 26 Share of losses of affiliates 2 4 - -------------------------------------------------------- -- -- ========================================================
Deferred income tax assets and liabilities at December 31, 1996 and 1995 are summarized as follows:
1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - -------------------------------------------------------------------------------------- Deferred tax assets relating to: Fixed assets -- 2,200 Net operating loss carryforwards 310,300 97,000 Other 3,400 9,200 - -------------------------------------------------------------------------------------- Deferred tax asset 313,700 108,400 Valuation allowance (175,200) (96,300) - -------------------------------------------------------------------------------------- 138,500 12,100 - -------------------------------------------------------------------------------------- Deferred tax liabilities relating to: Fixed assets (110,600) -- Other (27,900) (12,100) - -------------------------------------------------------------------------------------- Deferred tax liabilities (138,500) (12,100) - -------------------------------------------------------------------------------------- DEFERRED TAX ASSET PER BALANCE SHEET -- -- ======================================================================================
44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14 INCOME TAXES (continued) At December 31, 1996 and 1995 the Company estimates that it has, subject to Inland Revenue agreement, net operating losses ("NOLs") of (pound sterling)940,000,000 and (pound sterling)294,000,000, available to relieve against future profits. NOLs at December 31, 1995 exclude capital allowances on assets which were available to the Company, but had not been claimed. At December 31, 1996, NOLs include a claim for all available capital allowances. The NOLs have an unlimited carry forward period under UK tax law, but are limited to their use to the type of business which has generated the loss. 15 EXTRAORDINARY GAIN The Company had entered into interest rate swap agreements in order to manage the interest rate risk on its previous revolving credit facilities by swapping the interest rate on part of its variable rate debt for a fixed interest rate. Following the initial public offering of the Company in November 1994, the Company used a portion of the proceeds from the offering to repay all amounts outstanding under these credit facilities and the interest rate swap agreements ceased to be a hedge of the interest rate liability. The interest rate swaps were retained pending their use as hedges of interest rates on future drawdowns of the credit facilities. They had been placed on the balance sheet at their fair value at the date upon which the debt was repaid and an extraordinary gain equal to the aggregate fair value of the interest rate swaps at this date was recognized in the consolidated statement of operations. Any change in the aggregate fair value of the swap agreements since this date had been recognized in the consolidated statement of operations. On October 12, 1995, the Company sold the interest rate swaps, recognizing a loss on disposal. 16 SHAREHOLDERS' EQUITY MOVEMENTS IN SHARE CAPITAL During the year the Company issued 7,604,200 ordinary shares of 10 pence each for the following consideration: an additional 0.25% of the ordinary shares of Cable London plc, the surrender by Trans-Global (UK) Limited of its option to acquire 9.9% of equity in the South East Regional Franchise Area, and the remaining 20% of the ordinary shares of Telewest Communications (Cotswolds) Limited held by a minority interest. On October 3, 1995, the Company acquired the entire share capital of TCMN from its former shareholders in exchange for an aggregate of 183,994,960 ordinary shares of 10 pence each and 230,790,208 convertible preference shares of 10 pence each. On October 2, 1995, pursuant to a court-approved scheme of arrangement (the "Scheme of Arrangement"), the Company exchanged 735,468,440 ordinary shares of 10 pence each and 265,276,500 convertible preference shares of 10 pence each in consideration for the transfer of shares of TCCL to the Company. Dealings in ordinary shares and ADSs representing ordinary shares of TCCL ceased on the London Stock Exchange and NASDAQ National Market immediately prior to the execution of the Scheme of Arrangement and upon completion of the Scheme of Arrangement, dealings in the ordinary shares and ADSs representing ordinary shares of the Company commenced. Immediately prior to the execution of the Scheme of Arrangement on October 2, 1995, TCCL restructured its share capital by converting 112,276,500 ordinary shares of 10 pence each into 112,276,500 convertible preference shares of 10 pence each. On November 22, 1994, immediately following the Contribution, TCCL issued 604,000,000 ordinary shares and 153,000,000 convertible preference shares to the Joint Venturers and completed an initial public offering in which 239,744,940 ordinary shares of 10 pence each were issued to the public market. CONVERTIBLE PREFERENCE SHARES The convertible preference shares are convertible into fully paid up ordinary shares at any time on the basis of one ordinary share for every convertible preference share provided that, immediately following the conversion, the percentage of the issued ordinary share capital of the Company held by members of the public, as defined by the listing rules of the London Stock Exchange, does not fall below 25%. The ordinary shares arising on conversion will rank pari passu in all respects with the ordinary shares then in issue. The holders of the convertible preference shares are entitled to receive a dividend of such amount as is declared and paid in relation to each ordinary share, subject to the dividend to be paid not exceeding 20 pence per share net of any associated tax credit. In the event of a winding-up of the Company or other return of capital, the assets of the Company available for distribution will be paid first to the holders of the convertible preference shares up to the sum of capital paid-up or credited as paid-up unless the right of election upon a winding-up of the Company has been exercised in respect of the convertible preference shares ("the Elected Shares"). If the election has been exercised, the holders of the ordinary shares and the Elected Shares will receive any surplus in accordance with the amount paid-up or credited as paid-up on the shares held. The holders of the convertible preference shares are not entitled to vote at any general meeting of the Company unless the meeting includes the consideration of a resolution for winding up the Company or a resolution modifying the rights or privileges attaching to the convertible preference shares. 45 17 SHARE-BASED COMPENSATION PLANS At December 31, 1996, the Company operated three types of share-based compensation plans: the Telewest Executive Share Option Schemes, the Telewest Sharesave Schemes, and the Telewest Restricted Share Scheme. The Company applies APB Opinion Bulletin No. 25 and related interpretations in accounting for its share-based compensation plans. Accordingly, no compensation cost has been charged to the statement of operations in respect of performance-based option grants since the options do not have exercise prices less than the market value of the Company's ordinary shares. Compensation cost has been recognized for fixed option grants since the options have exercise prices less than the market value of the Company's ordinary shares at the date of grant. Compensation cost has also been recognized for awards over ordinary shares made under the Telewest Restricted Share Scheme since the awards have no exercise price. Compensation cost recognized for fixed option grants and awards under the Telewest Restricted Share Scheme was (pound sterling)1,380,000, (pound sterling)1,334,000 and (pound sterling)nil for 1996, 1995, and 1994, respectively. If compensation cost for share option grants and for awards under the Telewest Restricted Share Scheme had been determined based on their fair value at the date of grant for 1996 and 1995 consistent with the method prescribed by SFAS 123, the Company's net loss and loss per share would have been adjusted to the pro forma amounts set out below:
1996 1995 (POUND STERLING)'000 (POUND STERLING)'000 - ----------------------------------------------------------------------- Net loss - As reported 262,391 137,531 - Pro forma 264,579 138,468 (POUND STERLING) (POUND STERLING) - ----------------------------------------------------------------------- Loss per share - As reported 0.28 0.16 - Pro forma 0.29 0.16 - -----------------------------------------------------------------------
PERFORMANCE-BASED SHARE OPTION COMPENSATION PLANS The Company has two performance-based share option plans: the Telewest 1995 (No. 1) Executive Share Option Scheme and the Telewest 1995 (No. 2) Executive Share Option Scheme. Under both plans, certain officers and key employees are granted options to purchase ordinary shares of the Company. The exercise price of each option generally equals the market price of the Company's ordinary shares on the date of grant. The options are exercisable between three and ten years after the date of the grant with exercise conditional on the Company's shares out-performing by price the FT-SE100 Index over any three year period preceding exercise. The Company may grant options for up to 92,000,000 ordinary shares. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model using a weighted-average risk-free interest rate of 8.1 per cent and 8.3 per cent for grants in 1996 and 1995, respectively, and an expected volatility of 30 per cent used for grants in both 1996 and 1995. The Company does not expect to pay a dividend on its ordinary shares at any time during the expected life of the option. 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17 SHARE-BASED COMPENSATION PLANS (CONTINUED) A summary of the status of the Company's performance-based share option plans as at December 31, 1996 and 1995, the first year in which the options were granted, and changes during the years ended on those dates is presented below:
1996 1995 WEIGHTED WEIGHTED NUMBER AVERAGE NUMBER AVERAGE OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE - ----------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 8,645,229 160.4p -- -- Granted 4,121,474 140.9p 8,871,398 160.3p Forfeited (1,527,851) 162.6p (226,169) 158.0p - ----------------------------------------------------------------------------------------------------------------- Outstanding at end of year 11,238,852 153.0p 8,645,229 160.4p ================================================================================================================= Options exercisable at year end 1,023,042 154.3p -- -- Weighted average fair value of options granted during the year 75.6p 86.0p
The following table summarizes information about the Company's performance-based share option plans outstanding at December 31, 1996.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------- --------------------------------- NUMBER WEIGHTED NUMBER OUTSTANDING AT AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED DECEMBER 31, REMAINING AVERAGE DECEMBER 31, AVERAGE RANGE OF EXERCISE PRICES 1996 contractual life exercise price 1996 exercise price - -------------------------------------------------------------------------------------------------------------------------- 138.0 - 141.0p 3,945,812 7.0 years 140.1p 343,954 140.6p 154.5 - 155.5p 5,275,536 5.8 years 154.6p 414,019 154.6p 171.5 - 173.5p 2,017,504 6.9 years 172.4p 265,069 171.8p - -------------------------------------------------------------------------------------------------------------------------- 138.0 - 173.5p 11,238,852 6.4 years 152.7p 1,023,042 154.3p - --------------------------------------------------------------------------------------------------------------------------
FIXED SHARE OPTION COMPENSATION PLANS The Company also operates the Telewest Sharesave Scheme, a fixed share option compensation scheme. Under this plan, the Company grants options to employees to purchase ordinary shares at a 20% discount to market price. These options can be exercised only with funds saved by employees over time in a qualified savings account. The options are exercisable between 37 and 66 months after the date of grant. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model using a weighted-average risk-free interest rate of 7.4 per cent, 7.2 per cent, and 8.7 per cent for grants in 1996, 1995 and 1994, respectively, and an expected volatility of 30 per cent for all years. The Company does not expect to pay a dividend on its ordinary shares at any time during the expected life of the option. A summary of the status of the Company's fixed share option plans as of December 31, 1996, 1995, and 1994 and the changes during the years ended on those dates is presented below:
1996 1995 1994 WEIGHTED WEIGHTED WEIGHTED NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE - ----------------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 3,345,941 139.6p 1,666,534 150.0p -- -- Granted 2,165,009 102.5p 2,168,157 134.0p 1,666,534 150.0p Forfeited (1,434,315) 139.8p (488,750) 150.0p -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Outstanding at end of year 4,076,635 119.8p 3,345,941 139.6p 1,666,534 150.0p =================================================================================================================================== Options exercisable at year end 75,977 32,200 -- Weighted average fair value of options granted during the year 49.7p 79.3p 97.4p
47 17 SHARE-BASED COMPENSATION PLANS (CONTINUED) The following table summarizes information about the Company's fixed share options outstanding at December 31, 1996.
OPTIONS OUTSTANDING - ---------------------------------------------------------------- NUMBER WEIGHTED AVERAGE OUTSTANDING AT REMAINING EXERCISE PRICE DECEMBER 31, 1996 CONTRACTUAL LIFE - ---------------------------------------------------------------- 102.5p 2,165,009 3.6 years 134.0p 1,258,104 4.6 years 150.0p 653,522 3.6 years - ---------------------------------------------------------------- 102.5 - 150.0p 4,076,635 3.9 years ================================================================
TELEWEST RESTRICTED SHARE SCHEME The Company operates the Telewest Restricted Share Scheme in conjunction with an employment trust, the Telewest Employees Share Ownership Plan Trust (the "Telewest ESOP"), which has been designed to provide incentives to executives of the Company based on the performance of the Company. Under the Telewest Restricted Share Scheme, executives may be granted awards over ordinary shares of the Company based on a percentage of salary. The awards are made for no consideration. The awards generally vest three years after the date of the award and are exercisable for up to seven years after the date when they vest. Awards granted under the Telewest Restricted Share Scheme may be made over a maximum of 4,000,000 ordinary shares of the Company. The fair value of each award is the share price of the ordinary shares on the date the award was made. A summary of the status of the Company's Restricted Share Scheme at December 31, 1996 and 1995, the first year in which the awards were made, and changes during the years ended on those dates is presented below:
1996 1995 NUMBER OF NUMBER OF SHARES SHARES - ------------------------------------------------------------- Outstanding at beginning of year 2,616,857 -- Granted 328,297 2,857,191 Exercised (62,920) -- Forfeited (233,801) (240,334) - ------------------------------------------------------------- Outstanding at end of year 2,648,433 2,616,857 ============================================================= Awards exercisable at year end 646,341 49,867 ============================================================= WEIGHTED AVERAGE FAIR VALUE OF AWARDS GRANTED DURING THE YEAR (pound sterling)1.47 (pound sterling)1.72
At December 31, 1996, the 2,648,433 awards outstanding and the 646,341 awards exercisable have weighted average remaining contractual lives of 8.2 years and 8.0 years, respectively. 18 COMMITMENTS AND CONTINGENCIES CAPITAL AND OPERATING LEASES The Company leases a number of assets under arrangements accounted for as capital leases, as follows:
ACQUISITION ACCUMULATED NET BOOK COSTS DEPRECIATION VALUE (POUND STERLING)'000 (POUND STERLING)'000 (POUND STERLING)'000 - ------------------------------------------------------------------------------- At December 31, 1996 Electronic equipment 46,634 (8,376) 38,258 Other equipment 8,780 (1,900) 6,880 At December 31, 1995 Electronic equipment 27,148 (3,352) 23,796 Other equipment 1,512 (432) 1,080 - --------------------------------------------------------------------------------
Depreciation charged on these assets was (pound sterling)7,106,000 and (pound sterling)3,194,000 for the years ended December 31, 1996 and 1995, respectively. The Company leases business offices and uses certain equipment under lease arrangements accounted for as operating leases. Minimum rental expense under such arrangements amounted to (pound sterling)3,065,000, (pound sterling)2,276,000 and (pound sterling)1,535,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Future minimum lease payments under capital and operating leases are summarized as follows as at December 31, 1996:
CAPITAL OPERATING LEASES LEASES (POUND STERLING)'000 (POUND STERLING)'000 - ------------------------------------------------------------------------- 1997 6,033 2,796 1998 7,036 2,234 1999 8,025 1,717 2000 9,320 1,687 2001 8,517 1,630 2002 and thereafter 32,411 10,116 - ------------------------------------------------- 71,342 Imputed interest (16,952) - ------------------------------------------------- Total 54,930 =================================================
It is expected that, in the normal course of business, expiring leases will be renewed or replaced. MINORITY INTERESTS In October 1993, the Company acquired all of the outstanding minority interests in the London South Regional Franchise Area from various shareholders other than the interest of one shareholder holding an approximately 0.03% interest in the London South Regional Franchise Area. 48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18 COMMITMENTS AND CONTINGENCIES (CONTINUED) In consideration for such minority interests, the Company made an initial payment to the sellers of approximately (pound sterling) 790,000 and may be required to make an additional payment to one of the sellers upon the occurrence of certain events (including the completion of certain share issuances by the Company). The amount of this payment is based upon the valuation of the London South Regional Franchise Area and the percentage of the franchise formerly owned by the minority shareholders. The Company does not expect any payments to the shareholders to have a material effect on the liquidity or capital resources of the Company. CONTINGENT LIABILITIES The Company is a party to various legal proceedings in the ordinary course of business which it does not believe will result, in aggregate, in a material adverse effect on its financial condition. 19 RELATED PARTY TRANSACTIONS The Company, in the normal course of providing cable television services, purchases certain of its programming from UK affiliates of TCI. Such programming is purchased on commercially-available terms. Total purchases in the year amounted to (pound sterling)6,951,000. The Company has management agreements with TCI and US WEST under which amounts are paid by the Company relating to TCI and US WEST employees who have been seconded to the Company. For the years ended December 31, 1996, 1995 and 1994, fees charged to the Company under the agreements were (pound sterling)2,185,000, (pound sterling)3,042,000 and (pound sterling)2,128,000, respectively. The Company has similar management agreements with Cox Communications, Inc. and SBC Communications, Inc. For the years ended December 31,1996 and 1995, fees charged to the Company under these agreements were (pound sterling)374,000 and (pound sterling)233,000, respectively. The Company has entered into consulting agreements with its affiliates pursuant to which the Company provides consulting services related to telephony operations. Under the agreements, the Company receives an annual fee from each affiliate based upon the affiliate's revenues. Fees received for the years ended December 31,1996, 1995 and 1994 were (pound sterling)642,000, (pound sterling)566,000 and (pound sterling)557,000, respectively. The Company also receives a fee for providing switching support services, comprising of a fixed element based on a number of switches and a variable element based on a number of lines. Fees received for the years ended December 31, 1996, 1995 and 1994, were (pound sterling)741,000, (pound sterling)827,000 and (pound sterling)822,000, respectively. 20 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1996 TOTAL FOURTH QUARTER THIRD QUARTER SECOND QUARTER FIRST QUARTER (POUND (POUND) (POUND) (POUND) (POUND) STERLING) STERLING) STERLING) STERLING) STERLING) '000 '000 '000 '000 '000 - ----------------------------------------------------------------------------------------------------------------- Revenue 290,266 83,663 73,123 68,320 65,160 Operating loss (155,400) (46,095) (34,512) (38,536) (36,257) Finance expenses, net (90,788) 28,222 (30,710) (54,503) (33,797) Net loss (262,391) (22,361) (69,303) (97,080) (73,647) Loss per ordinary share 28 pence 2 pence 7 pence 10 pence 8 pence ================================================================================================================= 1995 TOTAL FOURTH QUARTER THIRD QUARTER SECOND QUARTER FIRST QUARTER (POUND (POUND) (POUND) (POUND) (POUND) STERLING) STERLING) STERLING) STERLING) STERLING) '000 '000 '000 '000 '000 - ------------------------------------------------------------------------------------------------------------------ Revenue 144,784 57,144 32,240 28,969 26,431 Operating loss (90,197) (33,464) (20,135) (19,209) (17,389) Finance expenses, net (34,607) (29,344) (3,662) (1,064) (537) Net loss (137,531) (66,346) (27,325) (23,547) (20,313) Loss per ordinary share 16 pence 7 pence 3 pence 3 pence 2 pence =================================================================================================================
The Company regularly reviews the estimated useful lives of its property and equipment and the estimates used in calculating the capitalizable overheads which relate to the construction of the cable network. With effect from January 1, 1996, the Company has revised the estimated useful lives of certain assets as set out in Note 3 to the consolidated financial statements and certain of the estimates used in calculating capitalizable overheads. The impact of these revisions is to increase the depreciation charge for the year from (pound sterling)110,233,000 to (pound sterling)129,716,000 and to increase the loss per ordinary share for the year by 2 pence, and to increase the capitalization of overheads in the year from (pound sterling)38,812,000 to (pound sterling)54,019,000, and to reduce loss per ordinary share for the year by 2 pence. This impact principally has been accounted for in the fourth quarter of 1996. Finance expenses includes foreign exchange gains and losses on the re-translation or valuation of non-Sterling denominated financial instruments using period end exchange rates and market valuations. 49 SUPPLEMENTARY FINANCIAL INFORMATION - FIVE YEAR SUMMARY
YEAR ENDED DECEMBER 31 COMPANY JOINT VENTURE(1) PREDECESSOR BUSINESSES(2) 1996 1995(3) 1994 1993 1992 (POUND (POUND (POUND (POUND (POUND STERLING) STERLING) STERLING) STERLING) STERLING) '000 '000 '000 '000 '000 - -------------------------------------------------------------------------------------------------------------------------- BALANCE SHEET DATA: Property and equipment (net) 1,447,194 1,063,808 454,843 269,974 149,571 Total assets 2,241,940 2,289,720 878,156 413,865 236,474 Investment in affiliates 69,420 80,703 81,907 68,838 54,849 Debt(4) 879,351 792,265 3,886 49,386 23,386 Equity 1,070,797 1,322,748 776,934 311,695 189,015 INCOME STATEMENT DATA: Revenue Cable television 121,224 64,740 35,875 20,729 12,600 Telephony - residential 125,013 57,597 23,471 11,261 3,462 Telephony - business 34,562 17,449 8,812 4,908 2,043 Other 9,467 4,998 3,869 3,440 602 - -------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUE 290,266 144,784 72,027 40,338 18,707 - -------------------------------------------------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES: Programming (69,906) (32,194) (15,500) (8,403) (5,286) Telephony (52,572) (29,526) (14,714) (10,203) (3,916) Selling, general and administrative (167,323) (105,388) (60,414) (32,505) (17,411) Depreciation (129,716) (60,019) (30,320) (17,635) (9,942) Amortization (26,149) (7,854) (1,827) (840) (326) - -------------------------------------------------------------------------------------------------------------------------- OPERATING LOSS (155,400) (90,197) (50,748) (29,248) (18,174) - -------------------------------------------------------------------------------------------------------------------------- Share of (loss)/income of affiliates (15,973) (12,777) (8,466) (7,540) (6,905) Financial expenses, net(4) (90,788) (34,607) (6,137) (651) (1,057) Extraordinary gain -- -- 7,287(5) -- -- Net loss (262,391) (137,531) (58,050) (37,439) (26,136) Loss per ordinary share before extraordinary gain (pro forma loss for 1994) (28 pence) (16 pence) (10 pence) Extraordinary gain -- -- 1 pence Loss per ordinary share (pro forma loss for 1994) (28 pence) (16 pence) (9 pence) ===========================================================================================================================
(1) See Note 1 (Organization and history) to the US GAAP Consolidated Financial Statements. (2) Predecessor Businesses refers to certain businesses owned by TCI prior to the formation of the Joint Venture and which are now owned by the Company. (3) See Note 5 (Business combinations) to the US GAAP Consolidated Financial Statements. (4) See Note 13 (Debt) to the US GAAP Consolidated Financial Statements. (5) See Note 15 (Extraordinary gain) to the US GAAP Consolidated Financial Statements. 50 Shareholder information SHARE AND ADS INFORMATION Telewest shares trade under the symbol "TWT" on the London Stock Exchange. American Depositary Shares ("ADSs") (evidenced by American Depositary Receipts ("ADRs")) representing Telewest shares trade on the Nasdaq Stock Market's National Market under the symbol "TWSTY". Each American Depositary Share represents ten Telewest shares. The following table sets out, for the periods indicated, the high and low middle market quotations for Telewest shares on the London Stock Exchange and the high and low reported trade prices for the ADSs representing Telewest shares on the Nasdaq Stock Market's National Market. All information with respect to periods prior to the completion of the merger with SBC Cablecomms (UK) in October 1995 relate to ordinary shares or ADSs representing ordinary shares of the former holding company.
Ordinary shares(1) ADSs(2) High Low High Low - -------------------------------------------------------------------------------- 1995 First Quarter 187p 167p $29.88 $25.88 Second Quarter 176p 148.5p $28.00 $23.38 Third Quarter 195p 153p $30.63 $24.00 Fourth Quarter 194p 155p $30.75 $23.88 1996 First Quarter 156p 118p $24.38 $17.81 Second Quarter 188.5p 145p $28.50 $21.63 Third Quarter 161p 119p $25.13 $18.50 Fourth Quarter 141.5p 117.5p $23.25 $18.63 ================================================================================
(1) The prices set out for the Telewest shares are derived from the London Stock Exchange Daily Official List. (2) The prices set out for the ADSs are provided by the Nasdaq Stock Market's National Market. REGISTRAR AND DEPOSITARY Enquiries concerning holdings of Telewest shares should be addressed to the Registrars, who are Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA. Tel: (01903) 502541. Changes in a holder's address should also be notified to the Registrars. The Bank of New York is the Authorized Depositary Bank for the Telewest ADR programme and all enquireies regarding ADR holder accounts and payment of dividends should be directed to: The Bank of New York, ADR Department, 101 Barclay Street, New York NY 10286. Tel: +(001)800 524 4458. In accordance with US securities laws, each year the Company prepares an Annual Report on Form 10-K. A copy of the Form 10-K for the fiscal year ended 1996 is available without charge upon written request made to the Company Secretary at the address below. The Company does not currently intend to pay dividends on the ordinary shares or convertible preference shares as it intends to retain earnings, if any, for the foreseeable future to fund the development and growth of the business of the Group. In addition, the ability of certain direct and indirect subsidiaries of the Company to pay dividends, or make advances or other payments to Telewest or other members of the Group for payment of dividends is effectively prohibited by the terms of certain financing arrangements. However, if any dividends are paid, holders of ADSs will receive their dividends net of fees, expenses and taxes, if any, withheld by the Depositary, pursuant to the terms of the Deposit Agreement relating to the ADSs. For further information regarding the tax consequences of ownership of Telewest shares and ADSs, refer to "Certain Tax Consequences of Ownership of Telewest Ordinary Shares and ADSs" in the Proxy Statement. CREST - SHARE SETTLEMENT SYSTEM The Company joined CREST, the new settlement system for shares and other securities, on 18 November 1996. There are 376 CREST holdings, holding 239,736,385 Telewest shares as at 11 March 1997. EX-21 11 LIST OF SUBSIDIARIES 1 EXHIBIT 21 TELEWEST PLC SUBSIDIARY LIST: NAME STATE OR JURISDICTION OF INCORPORATION - ---- -------------------------------------- Crystal Palace Radio Limited England and Wales Telewest Communications (London South) Limited England and Wales Cable Guide Limited England and Wales Telewest Communications (South West) Limited England and Wales Avon Cable Investments Limited England and Wales Telewest Communications Scotland Holdings Limited Scotland Telewest Communications (Scotland) Limited Scotland Telewest Communications (Motherwell) Limited Scotland Telewest Communications (Dundee and Perth) Limited Scotland Telewest Communications (Cumbernauld) Limited Scotland Telewest Communications (Glenrothes) Limited Scotland Telewest Communications (Falkirk) Limited Scotland Telewest Communications (Dumbarton) Limited Scotland Telewest Communications (North East) Limited England and Wales Telewest Communications (Tyneside) Limited England and Wales Telewest Communications (South East) Limited England and Wales Telewest Communications (South Thames Estuary) Limited England and Wales 2 Telewest Communications (Cotswolds) Limited England and Wales Telewest Communications Cable Ltd England and Wales Telewest Communications Networks Limited England and Wales Telewest Parliamentary Holdings Limited England and Wales Telewest Communications Group Limited England and Wales Telewest Communications Holdings Limited England and Wales Theseus No. 1 Limited England and Wales Theseus No. 2 Limited England and Wales TCI/US WEST Cable Communications Group Colorado United Cable (London South) Limited Partnership Colorado London South Cable Partnership Colorado Avon Cable Limited Partnership Colorado Edinburgh Cable Limited Partnership Colorado Tyneside Cable Limited Partnership Colorado Estuaries Cable Limited Partnership Colorado Cotswolds Cable Limited Partnership Colorado London South Joint Venture England and Wales Avon Cable Joint Venture England and Wales Telewest Communications (Scotland) Venture England and Wales Telewest Communications (North East) Partnership England and Wales Telewest Communications (South East) Partnership England and Wales Telewest Communications (Cotswolds) Venture England and Wales 3 Telewest Communications (Midlands and North West) England and Wales Limited Southwestern Bell International Holdings Limited England and Wales Telewest Communications (Telford) Limited England and Wales Telewest Communications (Midlands) Limited England and Wales Telewest Communications England and Wales (Fylde & Wyre) Limited Telewest Communications (North West) Limited England and Wales Telewest Communications England and Wales (Wigan) Limited Telewest Communications England and Wales (Liverpool) Limited Telewest Communications England and Wales (St Helens and Knowsley) Limited Telewest Communications England and Wales (Central Lancashire) Limited Cable Adnet Limited England and Wales Telewest Communications (Worcester) Limited England and Wales Telewest Communications (Southport) Limited England and Wales Telewest Communications (Lothian and Fife) Limited Scotland Cable Internet Limited England and Wales EX-27 12 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements contained in the body of the accompanying Form 10-K and is qualified in its entirety by reference to such financial statements 1,000 POUNDS STERLING YEAR DEC-31-1996 DEC-31-1996 1.7123 79,116 0 61,699 5,405 0 0 1,755,434 308,240 2,241,940 0 879,351 0 49,607 92,757 928,433 2,241,940 0 290,266 0 122,478 0 0 105,172 (262,341) 50 (262,391) 0 0 0 (262,391) (0.28) 0
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