NTL shares slide as it launches £350m bond to shore up finances

The share price of NTL, Britain's biggest cable system operator, fell 9 per cent yesterday after it launched a $500m (£350m) bond issue and issued preliminary first-quarter results that showed healthy gains in turnover and operating cash flow.

The share price of NTL, Britain's biggest cable system operator, fell 9 per cent yesterday after it launched a $500m (£350m) bond issue and issued preliminary first-quarter results that showed healthy gains in turnover and operating cash flow.

The new financing will see NTL raise money by selling seven-year bonds convertible into shares in the company. Last month, it raised $388m in financing from GE Capital. With debt of £10bn, NTL is striving to allay investor concerns about its financing. Analysts are forecasting the company will move into profit in 2004, but until then question marks are likely to surround the group's finances.

JP Morgan recently estimated that NTL has enough cash and credit facilities to last until the end of 2002. Other analysts believe the group may need substantial additional funding by the end of this year.

First-quarter earnings before interest, depreciation and amortisation (or Ebitda) rose 32 per cent to £86m from the fourth quarter. Sales grew just 6 per cent to £622m. Full figures are scheduled for release tomorrow. In 2000, NTL posted a pre-tax, pre-exceptional loss of $3.07bn.

Barclay Knapp, the chief executive of NTL, said: "We are pleased that, in line with our stated strategy of focusing on raising revenues from existing customers, average revenue per user increased in the first quarter as a result of migrating customers to digital TV, increasing prices and upselling additional products and services. We expect this trend to continue in the second quarter."

Investors, however, were less pleased. NTL shares, which moved to the New York Stock Exchange from Nasdaq late last year, fell $2.93 to $28.17 in mid-day trading. The stock peaked above $100 last year.

During the quarter, NTL's number of digital TV subscribers rose to 757,000, while cable modem users increased to 26,300. The company expects to have 1.25 million digital TV subscribers by the year end and 100,000 customers signed up for cable modems.

Mr Knapp also said that Ebitda margins rose by three percentage points in the first quarter of 2001 from the fourth quarter of 2000.

NTL seized the mantle to become Britain's largest cable company in 1999 when it out manoeuvred Telewest to buy the residential network of Cable & Wireless. The company has also expanded into France, Switzerland and Germany, and has extensive broadcast transmission operations in the UK and overseas.