Telewest jumps in Q1. Or does it?

Losses up, customers down

Telewest turned in Earnings Before Bad Stuff (EBS) of £105m for Q1, a 15 per cent advance on the same period last year. Throw in the Bad Stuff - interest, depreciation, amortisation - and net losses were £187m, up 13 per cent on Q1, 2002 (-£166m). Turnover was flat at £335m (Q1 2002: £334m).

Most of the losses are attributed to bank debt, foreign exchange losses on dollar denominated debt and a whopping £81m in accrued bond interest. The company points out that under its proposed restructure - it owes £3.5bn to world+dog - it would not have incurred the accrued bond interest or the foreign exchange loss. So the "real" loss would have "been only £55 million". Yes, Telewest uses the words: "only £55 million". A mere bagatelle, no? The company really does need to sort out its refinancing negotiations which will see bondholders and banks gain 97 per cent of the company in exchange of debt.

Telewest ended the Q with 310,00 broadband subs, which is nice, because that's where the more profitable customers are.

but it's peddling backwards on overall numbers, which is not (nice). Total subscribers were down 15,000 during the quarter to 1.74 million. According to Telewest, customer losses are to be expected, because of the "focus on broadband, cash generation and profitable customers". Unless this is a euphemism for cutting off bad debtors, we think this is a poor argument. Since so much of Telewests cost are sunk (literally, in the ground) even low paying customers should increase marginal profits at relatively little cost.

Telewest claims that household churn has fallen and that marketing campaigns, especially around TV, will see the company return to customer growth in the second half of the year.

Here is Telewest's Q1 statement (pdf). ®

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