Virgin Media 2008 Annual Report Download - page 49

Customer Churn. Customer churn is a measure of the number of customers who stop subscribing
to our services. An increase in our customer churn can lead to increased costs and reduced revenue.
We continue to focus on improving our customer service and enhancing and expanding our service
offerings to existing customers in order to manage our customer churn rate. Our ability to reduce our
customer churn rate beyond a base level is limited by factors like competition, the economy and
customers moving outside our network service area, in particular during the summer season. Managing
our customer churn rate is a significant component of our business plan. Our customer churn rate may
increase if our customer service is seen as unsatisfactory, if we are unable to deliver our services over
our network without interruption, if we fail to match offerings by our competitors, if we increase our
prices, if there is an improvement in the U.K. housing market or if there is a prolonged economic
downturn.
Cable ARPU. Cable ARPU is a measure we use to evaluate how effectively we are realizing
revenue from our residential cable customers on our network. We believe that our ‘‘triple-play’’ cable
offering of television, broadband and fixed line telephone services is attractive to our existing customer
base and generally allows us to increase our Cable ARPU by facilitating the sale of multiple services to
each customer. Cable ARPU excludes any revenue from our Mobile segment.
Competition. Our ability to acquire and retain customers and increase revenue depends on our
competitive strength. There is significant and increasing competition in the market for our consumer
services, including broadband and telephone services offered by BT Group plc, or BT, and resellers or
local loop unbundlers, such as British Sky Broadcasting Group plc, or BSkyB, and Carphone
Warehouse (Talk Talk), alternative internet access services like DSL, satellite television services offered
by BSkyB and by BBC and ITV through Freesat, digital terrestrial television offered through Freeview,
internet protocol television offered by Tiscali S.p.A. and BT, and mobile telephone, television and data
services offered by other mobile telephone operators. Our business services also face a range of
competitors, including BT and Cable & Wireless plc. Certain competitors, such as BT and BSkyB, are
dominant in markets in which we compete and may use their dominance in those markets to offer
bundled services that compete with our product offerings. As a result of increased competition, we have
had to, and may be required to continue to, adjust our pricing, improve our product offering and offer
discounts to new and existing customers in order to attract and retain customers.
Capital Expenditures. Our business requires substantial capital expenditures on a continuing basis
for various purposes, including expanding, maintaining and upgrading our network, investing in new
customer acquisitions, and offering new services. If we do not continue to invest in our network and in
new technologies, our ability to retain and acquire customers may be hindered. Therefore, our liquidity
and the availability of cash to fund capital projects are important drivers of our revenue. When our
liquidity is restricted, so is our ability to meet our capital expenditure requirements.
Seasonality. Some revenue streams are subject to seasonal factors. For example, telephone usage
revenue by residential customers and businesses tends to be slightly lower during summer holiday
months. Our customer churn rates include persons who disconnect their service because of moves,
resulting in a seasonal increase in our churn rates during the summer months when higher levels of
U.K. house moves have traditionally occured and students leave their accommodation between
academic years.
Mobile Segment
Factors particularly affecting our Mobile segment include competition, Mobile ARPU, 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
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