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NTL under pressure
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December 21, 2001: 5:06 a.m. ET
Cable giant urged to cut costs and reduce huge debt
By CNN's Gordon Isfeld
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LONDON (CNN) - For beleaguered British cable company NTL, 2001 has been a year of mixed signals and poor reception.
Swelling debt, weak profits and a plunging share price have put increasing pressure on NTL to cut costs and restructure its operations. At the very least, analysts say, the company needs to clarify its business plan and set a firm timetable for making those changes.
If it fails to act soon, and is forced to file for bankruptcy, there will be no shortage of willing buyers for its European cable assets. Already, big U.S. names like AOL Time Warner (AOL: down $0.25 to $32.78, Research, Estimates) and Liberty Media have been mentioned.
"Maybe this is what NTL needs to take this step. Everyone is telling them to do something," Mikkel Hofstee, an analyst at ABN AMRO, told CNN. "I think there's not much choice."
NTL has grown quickly -- some say too quickly -- to become Britain's largest cable-TV company. In the past two years, it has announced a dozen acquisitions in the UK. It also has interests in France, Germany, Sweden and Switzerland, where it owns the country's biggest cable-TV operator, Cablecom.
But NTL's growing pains are producing big headaches for its top brass -- and its investors.
The company's stock, which trades in New York, has gone from a year high of $40 to a low of 72 cents.
NTL's market capitalisation has fallen to around $171 million, while its debt has risen to $17 billion. Its bonds are trading at levels that analysts believe are well below the break-up value of the company.
And the company continues to burn through money at a rapid pace -- about $829 million in the third quarter alone -- raising concerns that NTL could run out of cash by 2003.
Last month, those concerns led Moody's Investors Services to cut NTL's credit rating. That was followed with a similar downgrade by rating agency Standard & Poor's.
"Given the extremely high debt levels relative to revenue and earnings growth, NTL's ability to service interest payment is becoming increasingly challenging," S&P said in its rating report.
Those strong words helped push NTL's shares even lower and raised new concerns for the company's stock and bond holders.
On December 10, the company responded by announcing a series of a cost-cutting measures - including the elimination of 2,000 jobs, a pay freeze for managers and a review all its operations and spending.
Those job cuts, on top of 5,000 previously announced this year, will reduce NTL's UK workforce to 13,000.
Still, the company has been criticized for not moving quickly enough.
This week, NTL said it was delaying the long-awaited sale of its broadcast unit, although it was continuing talks with interested parties. The company had hoped to sell the unit -- which transmits signals for British commercial stations -- for about $1.4 billion.
At the same time, NTL issued a statement reassuring investors about its financial health, after speculation it would seek to swap it's $11.2 billion of bonds for equity as part of a restructuring.
"The company's management team is developing a new business plan, which will result in incremental positive cash flow," the company said, although details of the new plan would not be announced until early 2002.
NTL also reiterated that it had plenty of cash to meet its payments and that it would meet or exceed its full-year earnings forecast of $707 million.
In the third quarter of 2001, NTL reported revenues of $926 million, up 1.7 percent from the previous quarter. 
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