Virgin Media 2008 Annual Report Download - page 29

Our business services also face a wide range of competitors, including BT, C&W and COLT
Telecom, and a number of regional service providers. The nature of this competition varies depending
on geography, service offerings and the size of the marketable area.
In order to compete, we have had to reduce the prices we charge for our services or increase the
value of our services without being able to recoup associated costs. Reduced prices or increased costs
have had a negative impact on our margins and profitability and could continue to do so in the future.
In addition, some of our competitors offer services that we are unable to offer. If we are unable to
compete successfully, even following price reductions or value enhancements, we may not be able to
attract new customers or retain existing customers.
Failure to control customer churn may adversely affect our financial performance.
The successful implementation of our business plan depends upon controlling customer churn.
Customer churn is a measure of customers who stop using our services. Customer churn could increase
as a result of:
• the general reduction in the quality of our customer service, including billing errors;
• customers moving to areas where we cannot offer our digital television, or DTV, services;
• interruptions to the delivery of services to customers over our network and poor fault
management;
• the availability of competing services, some of which may, from time to time, be less expensive
or technologically superior to those offered by us or offer content that we do not offer;
• the potential loss of customers due to their required migration from our analog television, or
ATV, services to our more expensive DTV services when we stop transmitting our ATV signal;
and
• the general deterioration in economic conditions that could lead to customers being unable or
unwilling to pay for our services.
An increase in customer churn can lead to slower customer growth and a reduction in revenue.
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.
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