Virgin Media 2007 Annual Report Download - page 39

We could suffer losses due to asset impairment charges for goodwill and long-lived intangible assets.
In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, which we refer to in this annual report as FAS 142, goodwill and indefinite-lived
intangible assets are subject to annual review for impairment (or more frequently should indications of
impairment arise). Other intangible assets are also reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. On
December 31, 2007, we had goodwill and intangible assets of £3.3 billion. A downward revision in the
fair value of a reporting unit or intangible assets could result in an impairment and a non-cash charge
would be required. Any significant shortfall could lead to a downward revision in the fair value of such
assets, which could have a material effect on our reported net earnings.
We have limited capacity on our cable platform.
Our analog television, digital television, broadband internet and video on demand services are
transmitted through our core and access networks, which have limited capacity. We have plans in place
to add additional capacity to our core and access networks. Until these plans are implemented, we are
therefore limited in the number of channels that can be transmitted as part of our digital television
service. As new channels are developed, we may be unable to carry them on our platform due to these
capacity constraints. As such, our digital television offering may not be as competitive which could
result in an increase in customer churn and a decrease in revenue.
We may be adversely affected by a general deterioration in economic conditions in the U.K.
The risks associated with certain segments of our business become more acute in periods of a
slowing economy or recession. In our content segment, a slowing economy could be accompanied by a
decrease in advertising on our channels. Generally, expenditures by advertisers are sensitive to
economic conditions and tend to decline in recessionary periods and other periods of uncertainty. In
addition, consumers generally have less discretionary spending to purchase goods and services. Our
mobile segment may also be similarly affected by an economic slowdown as customers reduce their
expenditures on mobile phones and usage. While the impact of an economic slowdown on our business
is difficult to predict, it could result in a decline in revenue.
Risks Relating to Our Financial Indebtedness and Structure
We may not be able to fund our debt service obligations through operating cash flow in the future.
We may not achieve or sustain sufficient cash flow in the future for the payment of principal or
interest on our indebtedness when due. Consequently, we may be forced to raise cash or reduce
expenses by doing one or more of the following:
• increasing, to the extent permitted, the amount of borrowings under new credit facilities;
• restructuring or refinancing our indebtedness prior to maturity, and/or on unfavorable terms;
• selling or disposing of some of our assets, possibly on unfavorable terms; or
• foregoing business opportunities, including the introduction of new products and services,
acquisitions and joint ventures.
We cannot be sure that any of, or a combination of, the above actions would be sufficient to fund
our debt service obligations, particularly in times of turbulent capital markets.
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