NTL's quarterly results demonstrate an abrupt change of strategy. Customer acquisition has all but ceased. Increasing telecom prices is the new battle plan. This is sensible, but we question whether the potential revenue gains can do much for debt or equity holders. If UK customer numbers have peaked, even optimism about ARPU will not produce free cash flow. Our scepticism remains. NTL continues to raise money in huge volumes. But note that this quarter's capex (even after the end of the so-called network build-out) is still almost four times EBITDA because investment in providing new services has to continue (e.g. digital set-top boxes).
European handset sales have collapsed due to maturity of markets, lengthening replacement cycles and significant changes in operator marketing strategies.
Approximately 10-15% of European wireless users have multiple active SIMs; thus subscriber growth has actually been slower than reported and replacement cycles have been faster than perceived; this situation has now reversed in our opinion. The use of multiple active SIMs will diminish over time in our opinion, providing a further brake on sales.