Virgin Media 2007 Annual Report Download - page 33

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 customer service level requirements which are grouped into
three key categories.
These service level categories include: Base Service Levels which, in addition to ensuring that
employees are fully-trained, competent, courteous and respectful, set basic standards against which to
measure complaint handling, complaint levels and call center performance. Technical Service Levels
which measure certain technical requirements that affect our customers’ experience, such as service
availability and service response times. Aspirational Service Levels, which are levels of service that we
and Virgin Group wish to achieve over time, to create new service measures and increase the demands
on certain existing measures, covering a range of matters including customer satisfaction, customer
advocacy, complaint levels, call center performance and staff satisfaction. A failure to meet our
obligations under the license agreement 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, including faster broadband speeds;
• install and maintain cable and equipment; and
• finance maintenance and upgrades.
Our covenants in our senior credit facility effectively restrict our use of cash. If these covenants
affect 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.
A failure in our critical systems could significantly disrupt our operations, which could reduce our customer
base and result in lost revenues.
Our business is dependent on many sophisticated critical systems that support all of the various
aspects of our cable network operations. Our systems are vulnerable to damage from a variety of
sources, including telecommunications failures, malicious human acts, theft, natural disasters, fire,
power loss, gas build-up, war or other catastrophes or any other threat to business continuity.
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