NTL Incorporated (NTLI) CEO Stephen Burch made a presentation at Jefferies 4th Annual Communications Conference. The company made no comments and took no questions related to the status of negotiations with private equity firms over the possible takeover of NTLI. Based on press reports there is clearly something going on related to private equity. Whether a deal emerges is anyone’s guess but tope tier private equity firms are putting a lot of effort into structuring a deal which would seem t to place great pressure on the Board to provide something for shareholders if no deal is struck.
The presentation focused on business fundamentals including progress on merger synergies, improvements in NTL customer service, and rebranding to Virgin. Management comments on all fronts were constructive. One key

takeaway is that the new senior management team comes across as confident and competent. Sadly, that is an improvement over the prior regime…..
On synergies, Burch repeated the £250 million target by year end 2007 comprised of £200 million in operating expense savings and £50 million in capital spending savings. O numerous occasions regarding several different aspects of synergies Burch said the plan was ahead of schedule. Free cash flow at the current run rate is over £200 million so the magnitude of synergies are enormous. No wonder private equity is interested.
On customer service, Burch showed stats indicating an improvement for NTL and said that the original goal of matching merger partner Telewest by year end would be met in October. He admitted that improved perception by consumers and media will lag the improvement. He also reminded investors that customer service improvement have an economic benefit by reducing churn and upselling additional products.
On Virgin, Burch was very enthusiastic about the rebranding which will occur in 1Q07. He stated several times that all aspects of the rebranding strategy are set to roll out but that it would be delayed until early 2007. The combination of Virgin’s stellar brand reputation in the UK and NTL’s very poor reputation create substantial upside for NTL but not without risk.
Overall, I concur with Burch’s statements that while competition is tougher than ever in the UK TV, telephony, and broadband markets, NTL is a stronger company than it has ever been. Producing top line revenue growth, increasing ARPU, and hitting margin targets are no sure thing but the stock is cheap indicating that expectations are low.
With no private equity deal and no sweetener from the Board, the shares have 10-20% downside. A sweetener without a deal ought to keep the stock close to current levels, limiting downside to 0-10%. A private equity deal ought to be at $32 or better, providing 18% upside or more. I think odds strongly favor a deal or no deal with a sweetener so I am sticking to my long position in NTLI.