Virgin Media 2008 Annual Report Download - page 31

• the license agreement has a 30-year term, and we are obligated to pay a termination payment if
the license is terminated early under certain circumstances; and
• we are required to meet certain customer service level requirements.
These service level requirements, which are grouped into three key categories, include: (i) Base
Service Levels which, in addition to ensuring that employees are fully-trained, competent, courteous
and respectful, set basic standards against which to measure complaint handling, complaint levels and
call center performance; (ii) Technical Service Levels which measure certain technical requirements that
affect our customers’ experience, such as service availability and service response times; and
(iii) Aspirational Service Levels, which are levels of service that we and Virgin Group wish to achieve
over time, to create new service measures and increase the demands on certain existing measures,
covering a range of matters including customer satisfaction, customer advocacy, complaint levels, call
center performance and staff satisfaction.
A failure to meet our obligations under the license agreement could lead to a termination of the
license. If we lose the right to use the Virgin brand, we would need to rebrand those areas of our
business that have been rebranded, which could result in increased expenditures and increased
customer churn.
A failure in our critical systems could significantly disrupt our operations, which could reduce our customer
base and result in lost revenues.
Our business is dependent on many complex critical systems that support all of the various aspects
of our cable network operations. Our systems are vulnerable to damage from a variety of sources,
including telecommunications failures, malicious human acts, theft, natural disasters, fire, power loss,
gas build-up, war or other catastrophes or any other threat to business continuity. Moreover, our
servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar
problems. Unanticipated problems affecting our systems could cause failures in our information
technology systems, including systems that are critical for timely and accurate customer billing, or our
customer service centers or interrupt the transmission of signals over our cable network. We do not
currently have a formal company-wide disaster recovery plan, however, we are in the process of
creating plans for key areas of risk in the business. Sustained or repeated system failures that interrupt
our ability to provide service to our customers, prevent us from billing and collecting revenue due to
us, or otherwise meet our business obligations in a timely manner, would adversely affect our
reputation and result in a loss of customers and revenue.
We also maintain sensitive customer data on our systems and are subject to increasingly stringent
regulation relating to privacy and information security. Any data breach or loss could result in
significant costs, fines and reputational harm.
Our inability to obtain popular programming, or to obtain it at a reasonable cost, could potentially have a
material adverse affect on the number of customers or reduce margins.
For the provision of television programs and channels distributed via our cable network, we enter
into agreements with program providers, such as public and commercial broadcasters, or providers of
pay or on-demand television. We have historically obtained a significant amount of our premium
programming and some of our basic programming and pay-per-view sporting events from BSkyB, one
of our main competitors in the television services business. BSkyB is a leading supplier of programming
to pay television platforms in the U.K. and is the exclusive supplier of some programming, including its
Sky Sports channels and Sky Movie channels, which are the most popular premium subscription sports
and film channels, respectively, available in the U.K. We buy BSkyB wholesale premium content on the
basis of BSkyB’s rate card terms and pricing, which can be changed on 45 days’ notice by BSkyB, and
not under a long term supply contract.
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