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Womble · 10-05-2006, 09:19

Angel Dobardziev

Follow-up on NTL Q1 results: bumpy ride ahead

Following yesterday's comment on NTL's Q1 results we listened to the NTL teleconference, and we think it is worth expanding on this important development. The key thing to note was the bullishness of its management about its future prospects. Led by CEO Steve Burch, who brings substantial experience from Comcast in the US, NTL's management was very confident that it could execute on the accelerated integration of Telewest and Virgin, as well as the cost-reduction programme. Interestingly, only about 50% of the 3,400 positions that are to be lost will be through redundancies, the rest through natural attrition.

Management was also bullish about its growth prospects in upgrading its customers to triple and quadruple play, mostly by adding broadband and mobile to the mix. It also announced that NTL will soon look to trial and deploy Fusion-type fixed-mobile convergence (FMC) offerings, rather than stop at pure commercial bundles. Finally, NTL will continue investing in its business customer operations, particularly in the SME space, where, following C&W's decision to focus on large enterprise customers, it sees a major opportunity. Comment: Clearly, it is NTL's management's job is to be positive about the future. We believe it has a good plan, but there are massive challenges involved in executing it, on all fronts.

Looking at its growth strategy, it sensibly aims to drive home the message that quadruple-play bundles will deliver the growth. But that will be tricky. Its TV and telephony customers have been static for a while now, and it is talking about price increases from June in both of these areas, which is hardly going to stimulate further growth. Broadband growth has been healthy at around 200,000 net adds per quarter, but that will become difficult to sustain as the undbundlers, led by Carphone Warehouse, ramp up their efforts. As for the mobile element, Virgin's lack of network ownership and prepaid customer base are far from compatible with its vision of quadruple-play bundles and FMC services.

We believe its aggressiveness on the integration, cost reductions and efficiency improvement is appropriate. But that doesn't mean its execution is without risks. NTL is effectively reworking the body and the engine of its car, while driving at high speed - a highly risky endeavour. Especially considering that its reputation for service is already poor, and there is a real risk that the disruption may make matters worse before they get any better. NTL stresses that it aims to improve matters here by outsourcing some of its call-centre operations to IBM. That remains to be seen, as outsourcing call centres has been credited with reducing costs, but not always maintaining (let alone improving) customer service levels.

Overall, the new NTL (soon to be Virgin) has a good vision of where it wants the business to be. Much will depend on execution - but even with its best efforts, we believe there is a bumpy ride ahead.

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This article is an extract taken from Ovum's EuroView Daily Comment service. Providing our expert's views and opinion of the important news and events in European IT & Telecoms, this daily email bulletin is a component of Ovum's EuroView advisory service. If you have a comment or question regarding this article then please submit your details here:

10-05-2006, 09:19	#4
Womble Inactive Join Date: Jul 2003 Location: In A Politically Correct Hell!! Viva La Revolution Age: 58 Services: 20meg BB SACM : All the Channels and phone Posts: 864	Re: Q1 2006 Results Angel Dobardziev Follow-up on NTL Q1 results: bumpy ride ahead Following yesterday's comment on NTL's Q1 results we listened to the NTL teleconference, and we think it is worth expanding on this important development. The key thing to note was the bullishness of its management about its future prospects. Led by CEO Steve Burch, who brings substantial experience from Comcast in the US, NTL's management was very confident that it could execute on the accelerated integration of Telewest and Virgin, as well as the cost-reduction programme. Interestingly, only about 50% of the 3,400 positions that are to be lost will be through redundancies, the rest through natural attrition. Management was also bullish about its growth prospects in upgrading its customers to triple and quadruple play, mostly by adding broadband and mobile to the mix. It also announced that NTL will soon look to trial and deploy Fusion-type fixed-mobile convergence (FMC) offerings, rather than stop at pure commercial bundles. Finally, NTL will continue investing in its business customer operations, particularly in the SME space, where, following C&W's decision to focus on large enterprise customers, it sees a major opportunity. Comment: Clearly, it is NTL's management's job is to be positive about the future. We believe it has a good plan, but there are massive challenges involved in executing it, on all fronts. Looking at its growth strategy, it sensibly aims to drive home the message that quadruple-play bundles will deliver the growth. But that will be tricky. Its TV and telephony customers have been static for a while now, and it is talking about price increases from June in both of these areas, which is hardly going to stimulate further growth. Broadband growth has been healthy at around 200,000 net adds per quarter, but that will become difficult to sustain as the undbundlers, led by Carphone Warehouse, ramp up their efforts. As for the mobile element, Virgin's lack of network ownership and prepaid customer base are far from compatible with its vision of quadruple-play bundles and FMC services. We believe its aggressiveness on the integration, cost reductions and efficiency improvement is appropriate. But that doesn't mean its execution is without risks. NTL is effectively reworking the body and the engine of its car, while driving at high speed - a highly risky endeavour. Especially considering that its reputation for service is already poor, and there is a real risk that the disruption may make matters worse before they get any better. NTL stresses that it aims to improve matters here by outsourcing some of its call-centre operations to IBM. That remains to be seen, as outsourcing call centres has been credited with reducing costs, but not always maintaining (let alone improving) customer service levels. Overall, the new NTL (soon to be Virgin) has a good vision of where it wants the business to be. Much will depend on execution - but even with its best efforts, we believe there is a bumpy ride ahead. -------------------------------------------------------------------------------- About: This article is an extract taken from Ovum's EuroView Daily Comment service. Providing our expert's views and opinion of the important news and events in European IT & Telecoms, this daily email bulletin is a component of Ovum's EuroView advisory service. If you have a comment or question regarding this article then please submit your details here: