Virgin Media 2008 Annual Report Download - page 22

further strengthened C&W’s position in the market. Other providers compete within specific product
and geographic segments with Affiniti and COLT Telecom Group plc, or COLT Telecom, for example,
having network advantages within certain regions.
Within retail markets, traditional competitors are becoming increasingly focused, with organizations
such as C&W targeting the largest national and multi-national corporations. We continue to focus on
small, medium and large nationally oriented businesses and public sector organizations where
leveraging our network asset can provide an economic advantage.
System integrators, or SIs, are also becoming an increasing competitive threat, as IT integration,
management and outsourcing begins to form an element of many larger organizations’ requirements.
ntl:Telewest Business seeks to address this as an opportunity to drive sales of access network, the
underlying infrastructure for integrated IT systems, and has established a SI channel within the Service
Provider sales team.
Competition in the U.K. business telecommunications market continues to be based on value for
money, the key components of which are quality, reliability and price. In the future, further competition
from mobile operators is expected, as they explore strategies to enter the fixed line market with
convergence propositions to our target customers.
Mobile Segment
Virgin Mobile’s key competitors in mobile telephony are mobile network operators, such as O2,
Vodafone, Orange, T-Mobile and 3 UK. In addition, Virgin Mobile competes with other mobile virtual
network operators, including Tesco Mobile, Carphone Warehouse and ASDA. Competition in the
mobile telephony market is primarily driven by intensifying pricing pressure from both new and
established competitors, evolving customer needs and the emergence of new technologies.
In the broader telephony market, Virgin Mobile competes indirectly with many fixed line
telephone operators and resellers, and internet telephony providers in the U.K., including BT. See
‘‘Competition—Cable Segment’’ for more information on these competitors.
Content Segment
Virgin Media TV supplies basic television programming to the U.K. multi-channel television
market and generates revenues largely on advertising and subscription revenues from that television
programming.
Virgin Media TV’s television programming competes with other broadcasters and its advertising
revenues are dependent on market share. Market and economic factors apart from individual channel
performance may also adversely influence subscription and advertising revenues or carriage of the
channels. Virgin Media TV’s primary customer, other than Virgin Media itself, is BSkyB, which in 2007
used its dominance in the pay television market to substantially reduce carriage subscription payments
made to Virgin Media. As we are dependent upon carriage of our programming in order to attract
advertising revenue, BSkyB has considerable power to renegotiate the fees that we charge for our
programs. In 2008, we entered into a new carriage agreement with BSkyB for continued and extended
carriage of our Virgin Media TV channels on its satellite platform, at higher rates than under the
previous contract.
Virgin Media TV competes for program rights with broadcasters transmitting similar channels. As
a result of this and competition for a limited number of well-known program rights, the price of these
program rights is increasing and could increase further, thereby limiting Virgin Media TV’s ability to
purchase that programming for transmission on its channels or adversely affecting the profitability of its
channels. UKTV, Virgin Media’s joint ventures with the BBC, could be affected by similar factors,
although this is less likely due to a ‘first look’ program agreement with the BBC.
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