NTL's debt: What went wrong?

By CNN's Liz George

LONDON, England (CNN) -- Struggling to avert another huge corporate bankruptcy, UK cable group NTL is in the process of appointing various banks to help sort out its $17 billion of debt.

Primarily a cable TV operator, NTL also provides telephone and Internet access over its networks. It has around 8.7 million subscribers, mainly in Europe. And in the UK it's the largest cable TV operator, with 3 million customers.

So what went wrong?

"The main issue is actually not being able to get sufficient clients through to be able to use the facilities, and be able to earn money from it," says Justin Urquhart Stewart of 7 Investment Management.

"So like most companies when they're in the development stage ... this just happens to be a very high profile one, most companies in the development stage end up dying not because of bad structure or bad management, but from lack of cash, and that's exactly what's happened to NTL at the moment."

The firm's debt is split between bank loans and bonds. It has borrowed so much to invest in its infrastructure that its debt is around 35 times as great as its underlying earnings capacity -- although the industry norm is between 5 and 11 times.

NTL's competitors, COLT Telecom and Telewest, have debt-equity ratios of 95 percent and 154 percent respectively.

With such huge debt and most of the hard work already done in laying the cables, NTL is unlikely to fail completely. A partnership is more likely.

"I wouldn't be at all surprised if we're going to see a strategic partner or partners coming in, one to provide actual further capital and support but also to provide content and make sure that content is coming thru," says Stewart.

A new investor would need to inject more than $1.4 billion of much-needed cash into NTL to take the business forward, in exchange for a 25 to 50 percent stake in the group.

NTL shares, which trade on the New York Stock Exchange, have collapsed from $130 two years ago to just 40 cents on Friday.

Speculation is focusing on Liberty Media, which already holds a stake in Telewest.

If Liberty does come out as a partner, it could mark a consolidation in the UK cable market -- giving the sector added strength to compete against the might of Sky.