Virgin Media 2008 Annual Report Download - page 50

O2, Vodafone, Orange, T-Mobile and 3 UK, and from other mobile virtual network operators, including
Tesco Mobile and Carphone Warehouse. Many of our competitors are part of large multinational
organizations, have substantial advertising and marketing budgets, and have a significant retail
presence. If competitive forces prevent us from charging the prices for these services that we plan to
charge, or if our competition is able to attract our customers or potential customers we are targeting,
our results of operations will be adversely affected.
Mobile ARPU. Mobile ARPU is a measure we use to evaluate how effectively we are realizing
revenue from our Mobile customers. The mix of prepay and contract customers and level of usage have
a material impact on Mobile ARPU. The mix of our customer base is changing as we focus on
acquiring higher lifetime value contract customers, particularly through cross-selling to our Cable
segment customer base, rather than lower lifetime value prepay customers. Consequently, the number
of prepay customers is expected to decline in 2009, along with prepay usage.
Seasonality. Some revenue streams and cost drivers are subject to seasonal factors. For example,
in the fourth quarter of each year our customer acquisition and retention costs typically increase due to
the Christmas holiday period. Our Mobile ARPU generally decreases in the first quarter of each year
due to the fewer number of days in February and lower usage after the Christmas holiday period.
Distribution. We primarily rely upon third parties to distribute our mobile products and services.
If any of these distribution partners were to cease to act as distributors for our products and services,
or the commissions or other costs charged by the third parties were to increase, our ability to gain new
customers or retain existing customers may be adversely affected. We also distribute our products
through our own retail outlets.
Content Segment
Factors particularly affecting our Content segment include competition, the number of buyers for
our television channels across limited distribution platforms, our access to content, seasonality and
advertising revenue.
Competition. Our television channels compete with other broadcasters for advertising revenues,
subscription revenues, and programming rights. Our retail channels operated through sit-up compete
with a large variety of retailers in the U.K. market and with other television channels for audiences.
IDS, our advertising sales department, competes with advertising sales operations representing other
television broadcasters.
Limited Number of Buyers and Distribution Platforms. All of our channels are carried on our cable
platform and on the satellite platform owned by BSkyB. A few of our channels are also carried on the
free-to-air digital terrestrial television platform known as Freeview. Therefore, the principal third party
buyer of our television channels is BSkyB. Other than BSkyB, there are no significant buyers of our
television channels.
Access to Content. Most of the television content on the Virgin Media TV channels is purchased,
mainly from the U.S., and because there is a limited supply of content available and an increasing
number of digital channels in the U.K., Virgin Media TV has experienced and may continue to
experience an increase in the cost of its imported programming. Exchange rate movements have also
resulted in increased programming costs and may continue to do so.
Seasonality. Our Content segment incurs increased costs in the fourth quarter of each year due to
the need to provide enhanced programming over the important Christmas holiday period. Also, sit-up
generally records increased revenues and costs in the fourth quarter due to higher retail sales in the
lead up to the Christmas holiday.
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