Virgin Media 2007 Annual Report Download - page 52

Mobile Segment
Factors particularly affecting our Mobile segment include competition, seasonality and our third
party distribution arrangements.
Competition. Our ability to acquire and retain customers and increase revenue depends on our
competitive strength. There is significant competition in our markets from mobile operators, including
O2, Vodafone, Orange, T-Mobile and 3, and from other mobile virtual network operators, including
Tesco Mobile, BT Mobile and Carphone Warehouse. Many of our competitors are part of large
multinational organizations, have substantial advertising and marketing budgets, and have a significant
retail presence. If competitive forces prevent us from charging the prices for these services that we plan
to charge, or if our competition is able to attract our customers or potential customers we are
targeting, our results of operations will be adversely affected.
Seasonality. Some revenue streams and cost drivers are subject to seasonal factors. For example,
in the fourth quarter of each year our customer acquisition and retention costs typically increase due to
the Christmas holiday period. Our ARPU generally decreases in the first quarter of each year due to
the fewer number of days in February and lower usage after the Christmas holiday period. During the
summer holiday months, roaming revenue is generally higher as a result of increased international
travel.
Distribution. We primarily rely upon third parties to distribute our mobile products and services.
If any of these distribution partners were to cease to act as distributors for our products and services,
or the commissions or other costs charged by the third parties were to increase, our ability to gain new
customers or retain existing customers may be adversely affected. We also distribute our products
through our own retail outlets.
Content Segment
Factors particularly affecting our Content segment include competition, the number of buyers for
our television channels, our access to content, seasonality and advertising revenue.
Competition. Our television channels compete with other broadcasters for advertising revenues,
subscription revenues, and programming rights. sit-up competes with a large variety of retailers in the
U.K. market and with other television channels for audiences. IDS, our advertising sales department,
competes with advertising sales operations representing other television broadcasters.
Limited Number of Buyers. The principal third party buyer of our television channels is BSkyB.
Other than BSkyB, there are no significant buyers of our television channels.
Access to Content. Most of the television content on the Virgin Media TV channels is purchased,
mainly from the U.S., and because there is a limited supply of content available and an increasing
number of digital channels in the U.K., Virgin Media TV has experienced and may continue to
experience an increase in the cost of its programming.
Seasonality. Our Content segment incurs increased costs in the fourth quarter of each year due to
the need to provide enhanced programming over the important Christmas holiday period. Also, sit-up
records increased revenues and costs in the fourth quarter due to generally higher retail sales in the
lead up to the Christmas holiday.
Advertising Revenue. The majority of revenue for Virgin Media TV is from advertisers.
Consequently, Virgin Media TV’s revenue is directly affected by changes in the total spend on
television advertising in the U.K., the viewing levels for its channels and the proportion of the U.K.
advertising market represented by IDS.
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