Stephen Carter believes the company can emerge from its financial troublesas a stronger business, writes Jamie Smyth.

Mr Stephen Carter looks confident and surprisingly relaxed for a man who has spent months negotiating with bankers to help the New York-listed cable and telecoms company NTL claw its way back from one of the world's biggest bankruptcies. Sitting in his suite at the Morrison Hotel, the 38-year-old Harvard Business School graduate says he wants to focus on the future.

His message is simple: NTL got caught up in the telecoms storm but will emerge fundamentally a better business.

"It is clear the world changed pretty dramatically for everyone. . . the telecoms and the technology sector felt that backlash first although, interestingly, you can see it flow through to other sectors now," says Mr Carter, who cut his teeth in business at advertising agency J Walter Thompson.

"The sort of perverse upside is that we have had 18 months of rigorous review of our processes, disciplines, attention to detail and cash management.

"I'm very confident not only that we re-balanced the balance sheet but also re-balanced the income statement."

Clearly, Mr Carter will need this confidence and plenty of luck to turn NTL into a profitable enterprise. The group reported a second-quarter loss of $594 million (€606 million) in August, and NTL Ireland - which provides 370,000 customers with cable television - lost €24.2 million in the year to end-December 2001.

Poor results forced NTL to file for Chapter 11 bankruptcy protection in May as it laboured under debts of $17 billion, accumulated from the acquisition of European cable firms in the 1990s - such as Cablelink for €679 million.

The bankruptcy court recently agreed to allow NTL restructure its business by converting €10.6 billion of its debt mountain into equity. Shareholders will lose almost everything and control of NTL will shift to its bondholders.

The corporate structure of NTL will change post-Chapter 11 and between $10.6 billion and $11 billion debt will be removed, says Mr Carter, who will remain managing director and chief operating officer of NTL UK and Ireland.

"Post restructuring, the company will be divided in two. So the European company is one structure, and the UK and Ireland is another self-contained structure," he says. "There are two separate boards and there will be two completely separate bodies."

Analysts have speculated the division of NTL UK and Ireland and the firm's smaller European arm could result in a quick sale of NTL Euroco but Mr Carter won't be drawn on this, preferring to note that the firms should come out of Chapter 11 in early October.

"There is some legal paperwork to do and there are some issues to do with shareholders, some 'i's to dot, and 't's to cross. But we have court confirmation," he says.

The challenges faced by NTL are daunting, although the company faces different problems in the Irish and British markets.

NTL, which has linked seven million homes in the UK to its digital cable network, lost 70,000 television customers in the three months to August 2002 in Britain.

This high "churn rate" was driven by NTL's financial problems, service issues and the rapid advance of satellite firm BSkyB. Stemming this flow of customers will be a crucial issue for the firm as it emerges from Chapter 11.

"The priorities for NTL right now are sorting out why we are not as good as we might be," says Mr Carter. "Our business is about providing wired connections into people's homes. . . So one of our key priorities going forward as an operating business is to deliver outstanding customer service."

NTL's UK customers have registered thousands of complaints about the firm's service over the past year, and internet sites have been set up devoted to this issue.

"The thing that is important to bear in mind is that a lot of what we do is pretty cutting edge stuff; high-speed broadband is a two-year-old product, digital TV is a four-year-old product and enhanced TV is 18 months old.

"This is new stuff and the truth about new stuff is it goes wrong", says Mr Carter. NTL has received virtually no complaints about its telephony business because it's a 60-year-old product, he adds.

But there are signs that NTL is beginning to make an impact in the British internet market. It is scheduled to introduce a new internet service next week and already has 300,000 British broadband users.

We are adding 10,000 broadband customers a week, at the moment, says Mr Carter, who believes broadband is the best way to boost NTL's revenues.

The challenge for NTL Ireland, which has not yet upgraded its cable network to enable it to carry high-speed internet services, is slightly different. The firm has managed to hold its cable television customer base steady despite the rapid growth of BSkyB here.

In the three years since NTL Ireland acquired Cablelink, the firm has lost just 4,000 customers. Yet financial returns to the companies registration office show it is burning cash at a tremendous rate.

In the year to December 30th, 2001, NTL Communications Ireland lost €24 million on turnover of €69.6 million. In the previous 12 months, the firm lost €11 million on turnover of €66.1 million.

The cost of beginning work on upgrading NTL's Irish cable network to digital contributed to these figures. NTL subsequently halted its upgrade programme, preventing it from offering broadband services in its franchise areas of Dublin, Waterford and Galway.

This will cut the firm's costs but will also reduce its ability to boost revenues from its Irish network. So will a post-Chapter 11 NTL restart the upgrade programme?

"It's a myth and an inaccurate fact that we haven't been making investment in our business," says Mr Carter. "This year we will spend £400 million sterling [€637 million\] to £500 million on capital investment and we have been in Chapter 11. As far as broadband in Ireland is concerned, Graham [Sutherland, NTL's new managing director for Ireland\] and his team are working on some exciting plans in that area."

But Mr Carter gives no timetable for a restart to the upgrade programme despite repeated questions on the topic. And industry observers doubt whether the firm will ever be able to afford to upgrade its network, except in the already digitised Tallaght area.

"Right now in Ireland, we are concentrating on a digital roll-out. It's a different business from the UK, it's a TV-led business and we have hundreds of thousands of customers - that's where the focus is."

Since NTL relaunched its digital campaign in September 2001, it has persuaded 28,000 subscribers to upgrade to digital TV, which costs more than its standard analogue TV product. Mr Carter believes the pace can be increased to help NTL compete with BSkyB, which has 240,000 Irish digital television customers.

"In non-cabled areas, the mini-dish is an obvious second-best technology. But we would say to people that wired technology is a good place to be," he says. "There is additional functionality such as multi-room viewing."

Mr Carter says the telecoms regulator should introduce a fairer regime in the Republic. Currently NTL pays VAT to the Exchequer, a levy to the regulator, and is subject to price control, while its rival Sky is not regulated. "Do I think that this is fair or equitable? I most certainly do not."

Next week: Jamie Smyth interviews Mr Joe Browne, managing director of Xerox Ireland.

This week The Irish Times continues a five-part series of interviews with key Irish technology leaders addressing the current global economic environment and how it is affecting their businesses.

The interviews will be published in the technology section of Business This Week. In addition, an edited transcript of the full interviews will be published on www.ireland.com/technology to provide an insight into how the industry views its prospects during one of its most difficult periods.