Virgin Media 2006 Annual Report Download - page 37

income in particular jurisdictions, the tax rates in those jurisdictions, tax treaties between jurisdictions, the manner in which and extent
to which we transfer funds to and repatriate funds from our subsidiaries, accounting standards and changes in accounting standards,
and future changes in the law. Because we operate in more than one tax jurisdiction and may therefore incur losses in one jurisdiction
that cannot be offset against income earned in a different jurisdiction, we may pay income taxes in one jurisdiction for a particular
period even though on an overall basis we incur a net loss for that period.
We have a U.S. holding company structure in which substantially all of our operations are in U.K. subsidiaries that are owned by
one or more members of a U.S. holding company group. As a result, although we do not expect to have current U.K. tax liabilities on
our operating earnings for at least the medium term, our operations may give rise to U.S. tax on “Subpart F” income generated by our
U.K. subsidiaries, or on repatriations of cash from our U.K. operating subsidiaries to the U.S. holding company group. While we
believe that we have substantial U.S. tax basis in some of our U.K. subsidiaries which may be available to avoid or reduce U.S. tax on
repatriation of an equivalent amount of cash from our U.K. subsidiaries, there can be no assurance that the Internal Revenue Service,
or IRS, will not seek to challenge the amount of that tax basis or that we will be able to utilize such basis under applicable tax law. As
a result, although in accordance with applicable law we will seek to minimize our U.S. tax liability as well as our overall worldwide
tax liability, there can be no assurance that we will not incur U.S. tax liabilities with respect to repatriation of cash from our U.K.
subsidiaries to the United States. The amount of the tax liability, if any, would depend upon a multitude of factors, including the
amount of cash actually repatriated.
There is no assurance that new products we may introduce will achieve full functionality or market acceptance.
Our long−range plan includes IPTV and we cannot guarantee that this new product, or any other new products that we may
develop in the future, will perform as expected when first introduced in the market. Should these new products and services fail to
perform as expected or should they fail to gain market acceptance, our results of operations may be negatively impacted.
Virgin Mobile relies on T−Mobile’s network to carry its communications traffic.
Virgin Mobile relies on its long−term agreement with T−Mobile for voice, non−voice and other telecommunications services we
provide our mobile customers, as well as for certain ancillary services such as pre−pay account management. If the agreement with
T−Mobile is terminated, or if T−Mobile fails to deploy and maintain its network, or if T−Mobile fails to provide the services as
required under our agreement with them, or if this were required and we are unable to find a replacement network operator on a timely
and commercial basis, if at all, we could be prevented from carrying on our mobile business or, if we found a replacement operator,
we might be unable to carry on our mobile business only on less favorable terms or provide less desirable services. Additionally any
migration of all or some of our customer base to a new operator would be in part dependent on T−Mobile and could entail potential
technical or commercial risk. T−Mobile is also a customer of our business division. Any disagreements between T−Mobile and Virgin
Mobile may affect our other relationships with T−Mobile.
We rely on third parties to distribute our Virgin Mobile products and procure customers for our services.
Our ability to distribute Virgin Mobile products and services depends, to a large extent, on securing and maintaining a number of
third party distributors who sell our branded handsets and service packs, including Carphone Warehouse and prepay vouchers. These
distributors also procure customers for our competitors and, in come cases, themselves as well. In particular, Carphone Warehouse
also sells its own broadband and telephone services. They may also receive incentives to encourage potential customers to subscribe to
our competitors’ services rather than our own. They may at their discretion decide to cease to distribute our products and services.
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007