Virgin Media 2006 Annual Report Download - page 34

The sectors in which we compete are subject to rapid and significant changes in technology, and the effect of technological
changes on our businesses cannot be predicted.
The internet, television, fixed line telephone and mobile telephone services sectors are characterized by rapid and significant
changes in technology. The effect of future technological changes on our business cannot be predicted. It is possible that products or
other technological breakthroughs, such as VoIP (over fixed and mobile technologies), mobile instant messaging, wireless fidelity, or
WiFi, WiMax (i.e., the extension of local WiFi networks across greater distances) or internet protocol television, may result in our
core offerings becoming less competitive and render our existing products and services obsolete. We may not be able to develop new
products and services at the same rate as competitors or keep up with trends in the technology market as well as our competitors.
The cost of implementing emerging and future technologies could be significant, and our ability to fund that implementation may
depend on our ability to obtain additional financing.
We are licensed to use the Virgin name and logo but do not own it.
In February 2007, we rebranded certain areas of our business as Virgin Media and renamed our corporate parent Virgin Media
Inc. under a 30 year license agreement with Virgin Enterprises Limited to use the Virgin name and logo. The use of the Virgin Media
name and brand carries various risks, including the following:
• we will be substantially reliant on the general goodwill of consumers towards the Virgin brand. Consequently, adverse
publicity in relation to the Virgin Group or its principals, particularly Sir Richard Branson, who is closely associated with the
brand, or in relation to another Virgin name licensee, could have a material adverse effect on our business;
• the license agreement has a 30−year term, and we are obligated to pay a termination payment if the license is terminated early
under certain circumstances; and
• we are required to meet certain performance obligations under the license agreement, and a failure to meet those obligations
could lead to a termination of the license.
If we lose the right to use the Virgin brand, we would need to rebrand those areas of our business that have been rebranded,
which could result in increased expenditures and increased customer churn.
If we do not maintain and upgrade our networks in a cost−effective and timely manner, we could lose customers.
Maintaining an uninterrupted and high−quality service over our network infrastructure is critical to our ability to attract and retain
customers. Providing a competitive service level will depend in part on our ability to maintain and upgrade our networks in a
cost−effective and timely manner. The maintenance and upgrade of our networks will depend upon, among other things, our ability to:
• modify network infrastructure for new products and services;
• install and maintain cable and equipment; and
• finance maintenance and upgrades.
Financial covenants in our senior credit facility effectively limit our level of capital expenditures by stipulating minimum levels
of net cash generation. If this affects our ability to replace network assets at the end of their useful lives or if there is any reduction in
our ability to perform necessary maintenance on network assets, our networks may have an increased failure rate, which is likely to
lead to increased customer churn.
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007