Subject: [NEXTEL-1] Call them old-fashioned...Mooney Back In The Spot Light

From: [email-masked]
Date: Tue, 26 Aug 2003 03:58:02 -0400

Call them old-fashioned...

There are two new men at the head of NTL. As they
tell Kate Bulkley, their traditional management skills
are just what the company needs to return it to profit

Monday August 25, 2003
The Guardian

When Barclay Knapp was ousted from his post as chief
executive of NTL a week ago, the one remaining cable king
had finally been forced out of town. The announcement
marked the end of an era. Knapp was the last of the original
entrepreneurs of the UK cable business to leave his top job.
The establishment of a new currency for cable - realism - has
taken root and Jim Mooney and Simon Duffy have become the
new realism dealers at NTL.

Mooney, who was number two at US cellular operator Nextel,
took over as NTL chairman in March, while Duffy, former
finance chief at Orange and NTL's chief operating officer since
April, took Knapp's position last week.

The rise and fall of the Knapp-led NTL had been the biggest
cable story of the past 10 years and, by May 2002, its
massively debt-loaded balance sheet had dragged it into
bankruptcy. Knapp's days were numbered. It was always
unlikely that the man who led the company over the edge with
£15bn of debt would command the next phase after a huge
financial restructuring, including a massive £10.9bn
debt-for-equity swap, was negotiated late last year.

Mooney, an American known as a turnaround guy, and Duffy,
a Brit regarded as a hands-on operator, will guide NTL's
post-Knapp period, bringing to the business skills that are
almost totally opposite to those of the man they are replacing.

"The challenge facing all the telcos right now is how to
continue to grow and yet be much, much more efficient about
it," says Duffy. "Managers who built companies in the
entrepreneurial way focused on footprint and building the
brand. These guys are being replaced by rather more
old-fashioned managers who may not be the greatest
entrepreneurs in the world, but who connect the top line to the
bottom line and put the bottom line in the bank."

Duffy is, of course, talking about himself and Mooney. "I've
never founded or started a company in my life," admits Duffy.
"Basically, I'm a manager and that's what companies such as
NTL need these days."

NTL's new down-to-earth duo may have a challenge on their
hands, but NTL certainly has plenty of space to grow into. The
UK cable industry - of which NTL has a far larger share than
its only peer, Telewest - has long been an underperformer.
Knapp may have talked plenty of banks into lending him
money, but the £9bn of NTL cable infrastructure has generated
a surprisingly low number of subscribers. The current take-up
rate of NTL's three services is 35.5% - in other words, only
2.7m of the 6.9m homes passed by its cable pipes subscribe.
Observers can only speculate as to the sign-up levels Sky
could achieve if it were running the cable business.

Mooney and Duffy accept that past performance has been
poor. "There is potential to leverage the network that we've
already built into other complementary businesses, such as
wi-fi [wireless fibre]," says Mooney. "And that's without even
talking about our broadcasting business and our
business-to-business products. We're already looking at
creating a partnership with a wi-fi player that could use NTL's
cables to build a wi-fi network."

The consumer business represents 80% of NTL's business
and that is where the turnaround needs to take place. Mooney
is an advocate of the same old cable strategy as before - the
triple play for customers, including a package of TV,
broadband and telephone - but the difference is that he wants
a transparency of performance about each product that Knapp
never believed in.

Mooney wants to drive improved productivity through
efficiency, streamlining and better margins. Four hundred jobs
have already gone this year, mostly in the business telecom
division, and other jobs may go, but there are no plans for
"radical surgery" or mass redundancies among the 14,000
workforce. Instead, the kind of personnel changes taking place
within the new NTL will involve swapping administrators for
sales staff. There are also issues of unnecessary
infrastructure duplication in areas such as billing systems and
among the three business units. Harmonising billing, for
example, began six months ago and will have cost £75m by
the time it is completed next year.

"NTL should look like one company, both internally and
externally," says Mooney, "yet one would argue that it's still
fragmented by the acquisitions strategy. It's a big, messy
problem, but to drive productivity and efficiency and to grow
the margins, it needs to be tackled."

The only other operational headache is a long-running dispute
with Sky over the rates that the cable companies pay for
Rupert Murdoch's channels. Cable says that there is no profit
margin in the Sky channels, but the regulators have so far
backed Murdoch's pricing. Mooney says that he will continue
to argue against what the cable industry calls predatory
pricing because, without a change, it will be very difficult
indeed for NTL to make money from the television side of its
business alone.

And making money is something that NTL needs to do more
of if its high-cost debt load is to be refinanced. Considering the
turmoil of recent months, NTL's last two quarterly results have
been remarkably good. This has spurred a rise in the NTL
share price since it was relisted early this year. Mooney and
Duffy's operational backgrounds will draw them to improve the
operating numbers further. Paying up to 17% interest on a
large part - about £738m - of a total £4bn debt would hold
back any business. In fact, NTL is due to pay about £400m in
annual interest.

Speculation on a refinancing of the high cost part of the debt
has risen of late because about £55m of debt interest is due in
January 2004 alone. "The current business plan is totally
funded, but we're not going to sit there with a 17% interest
rate and do nothing," says Mooney. "You want to take
advantage of good quarterly results and be opportunistic."

The actual shape of the refinancing - perhaps a secondary
rights issue or a renegotiation of the interest rates - is not yet
clear. One thing that is clear, however, is that, until the
balance sheet is sorted out and the operating business
improved, there will be little time spent on thinking about a
merger with Telewest, which is grappling with its own
restructuring issues.

"Putting two things together that are broken will get you an
exponentially broken thing," says Mooney. "My job is to fix
NTL and whatever happens with Telewest will be dealt with by
the owners and their shareholders."

As CEO, Duffy is the man to put the bottom-line strategy into
practice, and he believes that making NTL a customer-centric
operation is the key, something that he learned at Orange. He
knows that Sky is beating him to digital television customers,
BT and ISPs such as Tiscali and Freeserve are increasingly
breathing down his neck on broadband, and BT and others are
also making things harder in the telephony area, with cheaper
calls. However, Duffy, who says he was asked by France
Telecom's chairman Thierry Breton to enter the race to run its
Orange subsidiary earlier this year, chose to come to NTL
instead "because it looked more of a challenge".

One of the biggest challenges has been customer
satisfaction, but improvements are being made, with 22%
fewer calls to customer services than a year ago. "We're
getting away from the culture of when customers called in and
NTL people tried to pass the problem off as quickly as
possible rather than owning the problem," says Duffy.
"Customer service rating has improved, but it's not perfect. I
don't believe you can tar NTL with the moniker of poor
customer service any more. We're not the best, but we're not
in the bottom end of the league."

A customer complaint website dubbed Knapp's empire "NTL
hell" and while it might take some time for that tag to become
a distant memory, at least the tide seems to be turning.

http://web.baytownsun.com/story.lasso?WCD=12573

------------------------ Yahoo! Groups Sponsor ---------------------~-->
Buy Ink Cartridges or Refill Kits for Your HP, Epson, Canon or Lexmark
Printer at Myinks.com. Free s/h on orders $50 or more to the US & Canada. http://www.c1tracking.com/l.asp?cid=5511
http://us.click.yahoo.com/l.m7sD/LIdGAA/qnsNAA/61FxlB/TM
---------------------------------------------------------------------~->

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/