Virgin Media 2007 Annual Report Download - page 32

computer download service of video on demand home entertainment content over a broadband
connection called BT Vision. BSkyB, Tiscali and others offer a similar service.
Our broadband service faces increased competition from BT, BSkyB, Carphone Warehouse
(TalkTalk), Orange, O2 and others. 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 price 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, C&W, 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, BT Mobile and ASDA, 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 have had 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
have had a negative impact on our margins and profitability and could continue to do so in the future.
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:
• general reduction in the quality of our customer service, including billing errors;
• 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;
• the availability of competing services, 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, or indeed loss of customers,
and a reduction in revenue.
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