Virgin Media 2006 Annual Report Download - page 24

example, have network advantages within certain regions, while Vanco benefits from the flexibility of being a virtual network
operator in particular product markets.
Within retail markets, traditional competitors are in a phase of consolidation and, as a result of the additional scale this affords,
organizations such as Cable & Wireless plc, or C&W, and Thus plc have begun to target larger multi−national corporations. We
continue to focus on small, medium and large nationally−oriented businesses where leveraging the network asset can provide an
economic advantage. In the future, further competition from mobile operators is expected, as they explore strategies to enter the fixed
line market with convergence propositions.
In the service provider market, BT and C&W continue to offer strong competition with network reach in the former and
aggressive pricing on key city−to−city routes in the latter.
Competition in the U.K. market continues to be based on value for money, the key components of which are quality, reliability
and price. Customers, particularly larger organizations and integrators who utilize the network to enable applications and solutions,
accept higher price points in exchange for consistent delivery and performance against service level agreements.
Mobile Segment
Virgin Mobile faces direct competition from mobile network operators and other mobile virtual network operators. Its key
competitors are the other major mobile communication providers in the U.K., including O2, Vodafone, Orange, T−Mobile and 3. In
addition, a number of smaller players have emerged including BT Mobile, Carphone Warehouse and Tesco Mobile.
In the broader telephony market, Virgin Mobile competes indirectly with many fixed line telephone operators and resellers, and
internet telephony providers in the U.K., including BT. See “Competition—Cable Segment” for more information on these
competitors.
Content Segment
Virgin Media TV supplies basic television programming to the U.K. multi−channel television market and generates revenues
largely on advertising and subscription revenues from that television programming.
Virgin Media TV’s television programming competes with other broadcasters and may lose audience share, as a result of which
its advertising revenues may decrease. Market and economic factors apart from individual channel performance may also adversely
influence subscription and advertising revenues or carriage of the channels. Virgin Media TV’s primary customer other than Virgin
Media itself is BSkyB, which has used its dominance in the pay TV market to reduce substantially carriage subscription payments
made to Virgin Media.
Virgin Media TV competes for program rights with broadcasters transmitting similar channels to those owned by Virgin Media
TV and those in which it has an interest by virtue of the companies comprising the UKTV Group, Virgin Media TV’s joint ventures
with BBC Worldwide. As a result of this competition for a limited number of well−known program rights, the price of these program
rights are increasing and could increase further, thereby limiting Virgin Media TV’s ability to purchase that programming for
transmission on its channels and those of UKTV, or adversely affecting the profitability of its channels.
ITV1 and Channel 4 have historically held dominant positions in generating advertising revenue due to their share of audience
viewing. This generally attracts a price premium (i.e. advertising revenue share higher than audience share) from advertisers who are
willing to pay more to launch advertising campaigns that quickly reach a large viewing audience. However, growing audience share at
a faster rate than market
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007