Virgin Media 2007 Annual Report Download - page 66

UKTV receives financing through a loan from Virgin Media, which was £145.6 million at
December 31, 2007. This loan effectively acts as a revolving facility for UKTV. We received cash
payments from UKTV in the form of loan capital repayments of £16.4 million for the year ended
December 31, 2007. We also received dividends, interest payments and payments for consortium tax
relief from UKTV totaling £21.9 million during 2007.
Consolidated Results of Operations for the Years Ended December 31, 2006 and 2005
Revenue
For the year ended December 31, 2006, revenue increased by 85.0% to £3,602.2 million from
£1,947.6 million for 2005. This increase was primarily due to the reverse acquisition of Telewest and the
inclusion of its revenues from March 3, 2006, and to the acquisition of Virgin Mobile and the inclusion
of its revenues from July 4, 2006.
Cable ARPU increased steadily through the year, reflecting our drive to encourage ‘‘triple-play’’
bundling and a focus on better quality customers. Our focus on acquiring new bundled customers and
on cross-selling to existing customers is shown by Cable RGUs per customer increasing from 1.99 at
December 31, 2005 to 2.17 at December 31, 2006 and by the percentage of our customers with
triple-play services growing from 29.3% at December 31, 2005 to 40.6% at December 31, 2006. These
increases arose primarily because the number of Cable RGUs per customer and the percentage of
customers were higher in the legacy Telewest business than in NTL.
Expenses
Operating costs. For the year ended December 31, 2006, operating costs, including network
expenses, increased by 94.6% to £1,572.8 million from £808.3 million during the same period in 2005.
This increase was primarily attributable to the reverse acquisition of Telewest and to the acquisition of
Virgin Mobile. Operating costs as a percentage of revenue increased to 43.7% for the year ended
December 31, 2006, from 41.5% for the same period in 2005, in part due to the inclusion of the
Telewest content segment subsequent to the reverse acquisition of Telewest and the new Mobile
segment subsequent to the acquisition of Virgin Mobile, since these segments have lower margins than
our Cable segment.
Selling, general and administrative expenses. For the year ended December 31, 2006, selling,
general and administrative expenses increased by 87.8% to £906.9 million from £483.0 million for the
same period in 2005. This increase was primarily attributable to the reverse acquisition of Telewest and
to the acquisition of Virgin Mobile. Selling, general and administrative expenses as a percentage of
revenue increased slightly to 25.2% for the year ended December 31, 2006, from 24.8% for the same
period in 2005, partly due to costs incurred in connection with the integration of NTL and Telewest
and increased stock based compensation expense offset by savings from lower employee related costs as
a result of involuntary employee terminations in the year ended December 31, 2006.
Other charges
Other charges of £67.0 million in the year ended December 31, 2006 related primarily to employee
termination costs and lease exit costs in connection with our restructuring programs initiated in respect
of the reverse acquisition of Telewest.
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