Problems for cable company NTL mounted yesterday as credit rating agency Moody's downgraded its outlook for the group and the telecoms regulator warned it not to default on its regulatory obligations on introducing digital services in Ireland. NTL could lose its cable licence following a decision to delay the introduction of digital services to some 360,000 customers in its franchise areas in Dublin, Waterford and Galway.

NTL's managing director, Mr Ian Jeffers, met the regulator, Ms Etain Doyle, yesterday to outline the firm's decision. A second meeting takes place next week with NTL's chief operating officer in the UK, Mr Stephen Carter. Following the meeting, a spokeswoman for the regulator said Ms Doyle had asked NTL to reconsider its decision and had "reminded it of its regulatory responsibilities".

Under legislation, the regulator has the power to revoke NTL's cable licence if it fails to fulfil a requirement to be able to supply more than 100,000 homes with digital services by March 2001.

Mr Jeffers admitted yesterday the firm had upgraded its network only to supply 36,000 homes with digital services so far. It is now almost certain to renege on the terms of its licence.

The tough economic environment for telecoms and cable operators has been blamed for the group's decision to delay its $350 million (€376 million) Irish investment.

This was further illustrated yesterday when Moody's downgraded the group's outlook to negative from stable. Moody's said the negative outlook was due to high debt levels relative to cash flow, which had not decreased in line with Moody's expectations.

"While recognising NTL's continued success in achieving subscriber growth and the rapid uptake of digital subscribers, Moody's believes the lower-than-expected entry price points for digital TV, the costs to rollout digital . . . and the costs associated with integrating CWC [Cable & Wireless Communications] into NTL's other operations will reduce the company's near-term ability to reduce leverage," said Moody's.