Virgin Media 2006 Annual Report Download - page 33

Our broadband service faces increased competition from BT, Pipex, Orange, Tiscali and others, as well as new providers such as
BSkyB and Carphone Warehouse (TalkTalk). Competitors may use new alternative access technology such as advanced, faster
asymmetric digital subscriber lines, or ADSL+2, to deliver higher speeds. Local loop unbundling may decrease costs for new entrants
and existing BT wholesale customers, leading to increased pricing competition.
Our fixed line telephony business competes with fixed line operators such as BT, telephone local loop unbundlers such as
Carphone Warehouse (TalkTalk) and BSkyB, and several mobile telephone operators such as Vodafone, O2, Orange and T−Mobile.
Our business services also face a wide range of competitors, including BT, Cable & Wireless Communications plc, COLT
Telecom Group plc and Thus plc, and a number of regional service providers. The nature of this competition varies depending on
geography, service offerings and the size of the marketable area.
In the mobile telephony market, we face direct competition from mobile network operators such as O2, Vodafone, Orange,
T−Mobile and 3, and other mobile virtual network operators, such as Carphone Warehouse, Tesco Mobile and BT Mobile, in addition
to fixed line telephone operators and internet telephony providers. Many of our competitors are part of large multinational groups,
have substantial advertising and marketing budgets, have greater retail presence and may benefit from greater economies of scale than
we do. As a mobile virtual network operator, our per unit economies may differ substantially from our competitors with their own
networks, which may impact our ability to compete.
In order to compete, we may have to reduce the prices we charge for our services or increase the value of our services without
being able to recoup associated costs. Reduced prices or increased costs would have a negative impact on our margins and
profitability. In addition, if we are unable to compete successfully, even following price reductions or value enhancements, we may
not be able to attract new customers, or retain existing customers.
Failure to control customer churn may adversely affect our financial performance.
The successful implementation of our business plan depends upon controlling customer churn. Customer churn is a measure of
customers who stop using our services. Customer churn could increase as a result of:
• billing errors and/or general reduction in the quality of our customer service as a result of the integration of billing systems
and customer databases;
• customers moving to areas where we cannot offer our digital television, or DTV, services;
• interruptions to the delivery of services to customers over our network and poor fault management;
• stricter customer credit policies as a result of the alignment of the historical policies of NTL and Telewest;
• the availability of competing services, such as the digital satellite services offered by BSkyB, the free−to−air digital television
services offered by Freeview and the telephone, broadband and dial−up internet services offered by BT, BSkyB, Carphone
Warehouse (TalkTalk) , Orange, Tiscali, Pipex and other third parties, some of which may, from time to time, be less
expensive or technologically superior to those offered by us or offer content that we do not offer; and
• the potential loss of customers due to their required migration from our analog television, or ATV, services to our more
expensive DTV services when we stop transmitting our ATV signal.
An increase in customer churn can lead to slower customer growth, increased costs and a reduction in revenue.
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007