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Virgin Media
Annual Report 2009

Table of contents

  • Page 1
    Virgin Media Annual Report 2009

  • Page 2
    ... by opening new Virgin Media branded stores and retail lite stands that sell our cable and mobile products. The number of our retail outlets increased by 49 to 72 by the end of 2009. In our Business division, our focus on growing retail data services to medium and large companies and public sector...

  • Page 3
    ...) VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED Delaware (State or other jurisdiction of incorporation or organization) 909 Third Avenue, Suite 2863, New York, New York (Address of principal executive office) (212) 906-8440 (Registrant's telephone number, including area code) Securities registered...

  • Page 4
    ... Disclosures about Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ... ... 39 40 41 87 90 91 91 93 Directors, Executive Officers and Corporate...

  • Page 5
    ... Media Investment Holdings Limited This annual report on Form 10-K (excepting financial statements responsive to Part IV, Item 15) covers both Virgin Media and VMIH, a company incorporated in England and Wales, with its registered office at 160 Great Portland Street, London W1W 5QA, United Kingdom...

  • Page 6
    ... financial statements is U.K. pounds sterling. Historical Structure of the Company Virgin Media Inc., formerly known as NTL Incorporated, is a Delaware corporation and is publicly traded in the United States on the NASDAQ Global Select Market and in the United Kingdom on the London Stock Exchange...

  • Page 7
    ... 2006, we expanded our product portfolio to include mobile telephony services with the acquisition of Virgin Mobile Holdings (UK) Limited, or Virgin Mobile, through a U.K. Scheme of Arrangement. In connection with the acquisition of Virgin Mobile we also entered into a license agreement with Virgin...

  • Page 8
    ...companies. Virgin Media Inc. (1)(2) Intermediate Holding Companies (3) Virgin Media Finance PLC (4) Virgin Media Investment Holdings Limited (5) Virgin Media Investments Limited Virgin Media Secured Finance PLC (6) Virgin Media Limited (7) Virgin Mobile Holdings (UK) Limited (8) Telewest UK...

  • Page 9
    ... October 1, 2009, our common stock was admitted to the Official List of the Financial Services Authority and commenced secondary trading on the main market of the London Stock Exchange under the ticker symbol ''VMED.'' We did not issue any new common shares in connection with our London listing. The...

  • Page 10
    ... and fixed line telephone services from us, and approximately 10.7% were ''quad-play'' customers. In addition, we provide a complete portfolio of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K. through Virgin Media Business...

  • Page 11
    ...video services subject to capacity limits which can affect data download speeds. Our cable network also offers benefits over the infrastructure of satellite service providers, which are unable to offer interactive services in the absence of a fixed line telephone connection, using third party access...

  • Page 12
    ... areas. Our broadband internet offering currently focuses on three tiers of high-speed broadband service at download speeds of up to 10 Mb, 20 Mb and 50 Mb, respectively. Our customers within each of these tiers also benefit from unlimited downloads, subject to our fair usage and traffic management...

  • Page 13
    ... from ITV plc, or ITV, one of the largest commercial broadcasters in the U.K., including the addition of up to 80 hours of catch-up TV per week. We offer our DTV customers a subscription VOD, or SVOD, package, including up to 2,300 episodes of premium TV programming and over 3,000 music videos. Our...

  • Page 14
    ... of TiVo services and technology in the United Kingdom. Fixed Line Telephony We provide local, national and international telephony services to our residential customers on our cable network. We offer a basic line rental service to our cable customers for a fixed monthly fee. In addition to basic...

  • Page 15
    ...additional music and video content available via our mobile platform in 2010 and have introduced pricing bundles structured to promote the use of multimedia platforms among our mobile customers. Non-cable Products and Services We also provide broadband and telephone services to residential customers...

  • Page 16
    ... use outsourced consumer call centers in the U.K., India and South Africa. Business Segment Our Business segment, managed through Virgin Media Business (formerly ntl:Telewest Business), offers a broad portfolio of voice, data and internet solutions to commercial customers in the U.K., ranging from...

  • Page 17
    ... Our private sector retail services focus on the telecommunications needs of small businesses to large, national corporations. Centralized telephone account managers serve small organizations (with 50 to 99 employees), while regionally-located account, service and project management teams, supported...

  • Page 18
    ... on-demand TV services as well as high-speed broadband services. We currently offer download speeds of up to 50 Mbps via coaxial cable, and have trials underway with respect to download speeds of up to 200 Mbps. Second, we use short length twisted copper-pair to connect fixed line telephony services...

  • Page 19
    ... a number of agreements with content partners for its IP pay television service, BT Vision. • British Sky Broadcasting Group plc. BSkyB, an established competitor in the pay television market, offers aggressively discounted triple-play bundles of broadband, television and fixed line telephone...

  • Page 20
    ... a return on investment. Competitors may use new alternative access technology such as ADSL2+, which provides subscribers with significantly faster download speeds when compared to traditional ADSL connections. In addition to the increasing competition and pricing pressure in the broadband market...

  • Page 21
    ... competition. BBC and ITV also offer a free-to-air digital satellite alternative to Freeview DTT service, known as Freesat. Freesat offers approximately 85 subscription-free channels, including select high definition channels such as BBC HD and ITV HD. Freesat channels are delivered to the home...

  • Page 22
    ...to fixed line telephone services. Mobile telephone services also contribute to the competitive price pressure in fixed line telephone services. In addition, we face competition from companies offering VoIP services using the customer's existing broadband connection. These include services offered by...

  • Page 23
    ... and customers within a given market. Development of the U.K. Digital Economy In June 2009, the U.K. government published a report setting out its strategy for the further development of the digital and communication sectors in the U.K., know as the Digital Britain Report. The Digital Britain Report...

  • Page 24
    ... The Digital Economy Bill covers a number of the recommendations under the Digital Britain Report, including measures to address illicit file sharing, and new duties of Ofcom to promote investment in networks and public service content, and to expand its reporting duties. We intend to engage closely...

  • Page 25
    ... TV content and improve the availability of BSkyB HD premium content, which would enable us to offer more competitive and innovative consumer offerings. Ofcom also initiated a review in 2006 of the terms under which operators of DTV platforms in the U.K., such as us, allow access to their platforms...

  • Page 26
    ... internet, fixed line telephone and mobile phone services we provide to our consumer and business customers, and in connection with the acquisition and branding of sports, movies and other premium television content and the sale of certain communications equipment, such as set top boxes and cable...

  • Page 27
    ... the number of media choices available to subscribers. In addition, continued consolidation within the media industry may permit more competitors to offer ''triple-play'' bundles of digital television, fixed line telephone and broadband services, or ''quad-play'' bundles including mobile telephone...

  • Page 28
    ... 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...

  • Page 29
    ...which we use to encrypt pay television and broadband services transmitted to our customers. However, increasingly sophisticated means of illicit piracy of television and broadband services are continually being developed, including in response to evolving technologies. Billing and revenue generation...

  • Page 30
    ... 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. In addition to providing programming...

  • Page 31
    ...In addition, unfavorable events in the economy, including a deterioration in the credit and equity markets, could significantly affect consumer and business demand for our products, as consumers may delay purchasing decisions or reduce or reallocate their discretionary funds. Our mobile services may...

  • Page 32
    ... to set prices, enter new markets or control our costs. Our principal business activities are regulated and supervised by Ofcom and the U.K. Office of Fair Trading, among other regulators. Regulatory change is an ongoing process in the communications sector at both the U.K. and the EU level. Changes...

  • Page 33
    ...upstream speeds of up to 10 Mbps in limited geographic areas and our development of a next generation set-top box and related services with Tivo. We are also increasing the availability of content available via our mobile telephony platform. There is no assurance that any new product or service that...

  • Page 34
    ...between T-Mobile and Virgin Mobile may affect our other relationships with T-Mobile. We depend on the ability to attract and retain key personnel without whom we may not be able to manage our business lines effectively. We operate in a number of rapidly changing technologically advanced markets that...

  • Page 35
    ..., thereby releasing capacity for new services, our current capacity limitations may affect our ability to carry new channels as they are developed. As such, our digital television offering may not be as competitive, which could result in an increase in customer churn and a decrease in revenue. 33

  • Page 36
    ... to be dedicated to the payment of interest and principal on existing indebtedness, thereby reducing the funds available for other purposes; • our ability to obtain additional financing in the future for working capital, capital expenditures, product development, acquisitions or general corporate...

  • Page 37
    ... limit the payment of dividends, loan repayments and other distributions to or from these companies under many circumstances. Various agreements governing our debt may restrict and, in some cases, may also prohibit the ability of these subsidiaries to move cash within their restricted group...

  • Page 38
    ... affect our stock price. Until June 2006, we had not paid any cash dividends on our common stock. We could determine not to continue to pay dividends on our common stock at the same level, or at all. In addition, the terms of our existing indebtedness limit the amount of dividends we can pay...

  • Page 39
    ... 600 significant customer or third party sites where we maintain network equipment and the various cable television, telephone and telecommunications equipment housed in street cabinet enclosures situated on public and private sites. Currently, four of our technical facilities are subleased...

  • Page 40
    ... adverse outcome in one or more of these matters could be material to our consolidated financial statements for any one period. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of our stockholders during the quarter ended December 31, 2009. 38

  • Page 41
    ... the United States. Our common stock is also listed in the U.K. on the London Stock Exchange. As of February 24, 2010, there were 93 record holders of our common stock. The following table sets forth the reported high and low price per share of our common stock on the NASDAQ Global Select Market for...

  • Page 42
    ... as a reverse acquisition. The new holding company, Telewest Global, Inc., changed its name to NTL Incorporated on March 3, 2006. From March 6, 2006, share prices reflect the market price for that company, which was renamed Virgin Media Inc. on February 6, 2007. ITEM 6. SELECTED FINANCIAL DATA The...

  • Page 43
    ... known as Virgin Media Holdings Inc., and for the period since March 3, 2006, these financial statements reflect the reverse acquisition of Telewest. 2009 Year ended December 31, 2008 2007 2006 (in millions, except per share data) 2005 Statement of Operations Data: Revenue ...Operating income (loss...

  • Page 44
    ... broadband service and one of the most advanced TV on-demand services available in the U.K. market. As of December 31, 2009, we provided service to approximately 4.8 million residential customers on our cable network. We are also one of the U.K.'s largest mobile virtual network operators by number...

  • Page 45
    ... and non-cable telephone and internet access services and cable television services; • monthly fees and usage charges for mobile services including charges for airtime, data, longdistance calls and roaming; and • charges for the supply of mobile handset and other equipment. Business • monthly...

  • Page 46
    ... programming and broadband internet platforms, except to the extent offset by an increase in our share of the advertising market. Currency Movements. We encounter currency exchange rate risks because substantially all of our revenue and operating costs are earned and paid primarily in U.K. pounds...

  • Page 47
    ... is a measure we use to evaluate how effectively we are realizing potential revenue from our residential cable customers on our network. We believe that our ''tripleplay'' cable offering of television, broadband and fixed line telephone services is attractive to our existing cable customer base and...

  • Page 48
    ...Talk); alternative internet access services like DSL; satellite television services offered by BSkyB and by BBC and ITV through Freesat; free-to-air digital terrestrial television offered through Freeview; internet protocol television offered by BT; and mobile telephone, television and data services...

  • Page 49
    ... Office of Communications; however, in respect of non regulated product pricing, the market is increasingly price sensitive. Operational Effectiveness. Because of the extensive use of optical fiber in our access networks, we are also able to provide high-speed ethernet services directly to business...

  • Page 50
    ...financial information used by management and the chief operating decision maker. During the first quarter of 2009, our operating structures were revised with a view to building a customer-focused organization able to respond effectively to rapid changes in the market, technology and customer demands...

  • Page 51
    ... model such as projected customer numbers, projected product sales mix and price changes, projected changes in prices we pay for purchases of fixed assets and services as well as projected labor costs. Considerable management judgment is necessary to estimate discounted future cash flows and those...

  • Page 52
    ...of the FASB ASC, in relation to connection and activation fees for cable television, as well as fixed line telephone and broadband internet services, on the basis that we market and maintain a unified fiber network through which we provide all of these services. Installation revenues in our Consumer...

  • Page 53
    ... that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted this guidance during the second quarter of 2009. In September 2009, the FASB ratified new accounting guidance for existing multiple-element revenue arrangements. The revised...

  • Page 54
    ...cost of sales increased primarily as a result of increased costs of BSkyB's basic and premium TV services and the cost of wireless routers that we began selling to our residential customers during 2008, partially offset by reduced interconnect costs as a result of lower usage of fixed line telephony...

  • Page 55
    ... charges in the year ended December 31, 2009 related primarily to involuntary employee termination costs and lease exit costs in connection with the restructuring program initiated in 2008. Restructuring and other charges in the year ended December 31, 2008 related primarily to contract and lease...

  • Page 56
    ... 2009 and our Business and Consumer reporting units as at October 1, 2009. As a result of these reviews we concluded that the fair values of the reporting units exceeded their carrying values. We performed our annual impairment review for our former Mobile, Virgin Media TV and sit-up reporting units...

  • Page 57
    ... period in 2008. The share of income from equity investments in the years ended December 31, 2009 and 2008 was largely comprised of our proportionate share of the income earned by UKTV, which was partially offset by our share of the losses incurred by Setanta Sports News. Setanta Sports News ceased...

  • Page 58
    ... 2008, our sit-up reporting unit received notification that one of its two licenses to broadcast over Freeview digital terrestrial television would not be renewed in January 2009. Along with this, the downturn in the economy had a negative impact on sit-up's business. Management performed a review...

  • Page 59
    ... for the Years Ended December 31, 2009 and 2008 A description of the products and services, as well as financial data, for each segment can be found in note 18 to the consolidated financial statements of Virgin Media Inc. The reportable segments disclosed in this document are based on our management...

  • Page 60
    ... growing to 60.5% at December 31, 2009 from 55.9% at December 31, 2008. A tripleplay customer is a customer who subscribes to all three of our television, broadband and fixed line telephone cable services. For the year ended December 31, 2009, mobile revenue decreased to £535.9 million from £570...

  • Page 61
    ... customers for dial-up internet packages which have not been sold since June 30, 2008, other rate decreases on bundled services introduced towards the end of 2008 and the introduction of acquisition discounts in the year ended December 31, 2009, partially offset by growth in revenue from new service...

  • Page 62
    ... some services for free or at a reduced rate in connection with promotional offers. The monthly cable average revenue per user, or cable ARPU, is calculated on a quarterly basis by dividing total revenue generated from the provision of telephone, television and internet services to customers who...

  • Page 63
    ... lifetime value. December 31, 2009 Three months ended September 30, June 30, March 31, 2009 2009 2009 December 31, 2008 Contract mobile customers(1): Opening contract mobile customers . Net contract mobile customer additions ...Closing contract mobile customers . . Prepay mobile customers (30 days...

  • Page 64
    ..., and new flexible customer propositions. December 31, 2009 Three months ended September 30, June 30, March 31, 2009 2009 2009 December 31, 2008 Opening customers ...Net customer movements ...Closing customers ...Opening non-cable products: Telephone ...Broadband ...Net non-cable product additions...

  • Page 65
    ... 31, 2009, revenue from business customers decreased by 7.2% to £580.8 million from £626.0 million for the year ended December 31, 2008. The decrease was attributable to declines in retail voice, Local Area Network (LAN) solutions and wholesale revenues, partially offset by growth in retail data...

  • Page 66
    ...carried on Virgin Media's cable platform and also satellite. Some channels are also available on Freeview. We account for our interest in UKTV under the equity method and recognized a share of net income of £16.5 million and £18.7 million in the years ended December 31, 2009 and 2008, respectively...

  • Page 67
    ... costs mainly as a result of fewer employees, lower bad debt expense and a reduction in costs in relation to marketing and our rebrand to Virgin Media in 2007. The decrease was partially offset by increased professional charges. Restructuring and Other Charges For the year ended December 31, 2008...

  • Page 68
    ... reduction in the remaining useful economic lives of certain intangible assets with effect from January 1, 2008. Goodwill and Intangible Asset Impairments We performed our annual impairment review for our former Mobile, Virgin Media TV and sit-up reporting units as at June 30, 2008. As a result of...

  • Page 69
    ... for the same period in 2007. The share of income from equity investments in the years ended December 31, 2008 and 2007 was largely comprised of our proportionate share of the income earned by UKTV, which was partially offset by the losses incurred by Setanta Sports News. See Segmental Results of...

  • Page 70
    ... 2008, our sit-up reporting unit received notification that one of its two licenses to broadcast over Freeview digital terrestrial television would not be renewed in January 2009. Along with this, the downturn in the economy had a negative impact on sit-up's business. Management performed a review...

  • Page 71
    ...to our television, broadband and fixed line telephone services. Cable ARPU was unchanged at £42.34 for the three months ended December 31, 2008 and 2007. Increases in cable ARPU, mainly due to selective price increases and successful up-selling and crossselling to existing customers, were offset by...

  • Page 72
    ... our rebrand to Virgin Media in 2007, lower employee related costs, and lower direct operating costs as a result of lower revenues. Summary Cable Statistics Selected statistics for our cable customers for the three months ended December 31, 2008 as well as the four prior quarters, are set forth in...

  • Page 73
    ... 31, 2008 2008 December 31, 2007 Opening customers ...Customer additions ...Customer disconnects ...Net customer movement ...Data cleanse(1) ...Closing customers ...Cable churn(2) ...Cable products(1)(3): Television ...DTV (included in Television) ...Telephone ...Broadband ...Total cable products...

  • Page 74
    ... month periods set forth in the table below: December 31, 2008 Three months ended September 30, June 30, March 31, 2008 2008 2008 December 31, 2007 Contract mobile customers(1): Opening contract mobile customers . Net contract mobile customer additions ...Data cleanse(2) ...Closing contract mobile...

  • Page 75
    ... of new offerings until the end of the year. December 31, 2008 Three months ended September 30, June 30, March 31, 2008 2008 2008 December 31, 2007 Opening non-cable products: Telephone ...Broadband ...Net non-cable product additions (disconnections): Telephone ...Broadband ...Closing non-cable...

  • Page 76
    .... Wholesale revenue decreased mainly as a result of fewer customers in a highly competitive market partly offset by stronger than usual customer equipment sales in the last three months of the year. Business Segment Contribution For the year ended December 31, 2008, Business segment contribution...

  • Page 77
    ... carriage of our Virgin Media TV channels on its satellite platform, effective from November 13, 2008. The new agreement provides for an increase in the annual carriage fee from £6.0 million to £30.0 million, plus a capped performance-based adjustment (allowing for maximum additional payment of up...

  • Page 78
    ... relating to broadband speed upgrades. Cash used in financing activities for the year ended December 31, 2009 was £69.7 million compared with cash used in financing activities of £427.3 million for the year ended December 31, 2008. For the year ended December 31, 2009, the principal uses of cash...

  • Page 79
    ... upon the receipt of sufficient funds from their respective subsidiaries to meet their obligations. In addition, the terms of our existing and future indebtedness and the laws of the jurisdictions under which our subsidiaries are organized limit the payment of dividends, loan repayments and other...

  • Page 80
    ... their participations to the new A tranches and revolving facility remained in the existing A tranches and revolving facility. On October 30, 2009, we further amended our senior credit facility to, among other things, permit the issuance of an unlimited amount of senior secured notes, provided that...

  • Page 81
    ... exceptions. In addition, our senior credit facility must be repaid and all commitments will be cancelled upon the occurrence of a change of control. Interest Margins The annual rate of interest payable under our senior credit facility is the sum of (i) the London Intrabank Offer Rate (LIBOR...

  • Page 82
    ...less than 80% of the consolidated operating cash flow of the bank group in any financial year guarantee the payment of all sums payable under our senior credit facility (other than Tranche C thereof) and such members are required to grant first-ranking security over all or substantially all of their...

  • Page 83
    ... of the obligors under our senior credit facility taken as a whole or any obligor's payment or other material obligations under our senior credit facility or related finance documents. Senior Unsecured Notes In November 2009, Virgin Media Finance issued U.S. dollar denominated 8.375% senior notes...

  • Page 84
    ...by Virgin Media Inc., Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by VMIH and Virgin Media Investments Limited. In December 2009, we partially redeemed our senior notes due 2014 using the...

  • Page 85
    ... scheduled trading date preceding the maturity date. Prior to August 15, 2016, holders may convert their notes, at their option, only under the following circumstances: (i) in any quarter, if the closing sale price of Virgin Media Inc.'s common stock during at least 20 of the last 30 trading days of...

  • Page 86
    ...certain cash dividends or distributions or stock repurchases where the price exceeds market values. In the event of specified fundamental changes relating to Virgin Media Inc., referred to as ''make whole'' fundamental changes, the conversion rate will be increased as provided by a formula set forth...

  • Page 87
    ... pay in the future. They are not required to be included in the consolidated balance sheet (in millions): Amount of Commitment Expiration per Period Less than 1-3 3-5 More than 1 year years years 5 years Other Commercial Commitments Total Guarantees ...Lines of credit ...Standby letters of credit...

  • Page 88
    ... in euros. We also purchase goods and services in U.S. dollars, euros and South African rand. Interest Rate Swaps We have entered into a number of interest rate swaps to mitigate the risk relating to the variability in future interest payments on our senior credit facility, which accrues interest at...

  • Page 89
    ... consolidated financial statements of Virgin Media Inc. and Management's Discussion and Analysis of Financial Condition and Results of Operations-Derivative Instruments and Hedging Activities. The fair market value of long term fixed interest rate debt and the amount of future interest payments on...

  • Page 90
    ... does not reflect the senior secured notes issued and related senior credit facility repayments made subsequent to the year end. See Liquidity and Capital Resources. Year ended December 31, 2010 Long term debt (including current portion) U.S. Dollars Fixed rate ...Variable rate ...Average interest...

  • Page 91
    ... obligations that occurred when the repayment condition under the senior credit facility was satisfied. Year ended December 31, 2009 Long term debt (including U.S. Dollars Fixed rate ...Variable rate ...Average interest rate ...current portion 531.9 US LIBOR plus 2.0%-3.5% 0.71 A423.9 EURIBOR plus...

  • Page 92
    ... three months ended March 31, 2009, we realigned our internal reporting structure and the related financial information used by our chief operating decision maker to assess the performance of our business. Our former operating segments were Cable, Mobile and Content, and the new operating segments...

  • Page 93
    ... annual report includes an attestation report of Ernst & Young LLP, our registered public accounting firm, regarding internal control over financial reporting of Virgin Media Inc. (c) Management's Annual Report on Internal Control Over Financial Reporting for Virgin Media Investment Holdings Limited...

  • Page 94
    ... express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable...

  • Page 95
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Virgin Media Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the...

  • Page 96
    ... for the 2010 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference to our Proxy Statement for the 2010 Annual Meeting of Stockholders. ITEM 14. PRINCIPAL ACCOUNTANT FEES...

  • Page 97
    ... statements of Virgin Media Investment Holdings Limited and Subsidiaries are included in Item 8: Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets-December 31, 2009 and 2008 ...Consolidated Statements of Operations-Years ended December 31, 2009, 2008 and 2007...

  • Page 98
    ... REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Virgin Media Inc. We have audited the accompanying consolidated balance sheets of Virgin Media Inc. and subsidiaries (the ''Company'') as of December 31, 2009 and 2008, and the related consolidated statements of operations...

  • Page 99
    VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions, except par value) December 31, 2009 2008 Assets Current assets Cash and cash equivalents ...Restricted cash ...Accounts receivable-trade, less allowances for doubtful £16.5 (2008) ...Inventory for resale ...Programming ...

  • Page 100
    VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (in millions, except per share data) Year ended December 31, 2009 2008 2007 Revenue ...Costs and expenses Operating costs (exclusive of depreciation shown separately below) Selling, general and administrative expenses ......

  • Page 101
    ... (17.5 572.3) (468.7) Net cash used in investing activities ...Financing activities: New borrowings, net of financing fees ...Proceeds from employee stock option exercises ...Principal payments on long term debt, including redemption premiums, and capital leases Dividends paid ...Realized gain on...

  • Page 102
    VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (in millions) Accumulated Other Comprehensive Income (Loss) Net Common Additional Comprehensive Foreign Pension (Losses) Stock $.01 Paid-In Income Currency Liability Gains on Accumulated Par Value Capital (Loss) ...

  • Page 103
    ...INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1-Organization and Business Virgin Media Inc. is a Delaware corporation and is publicly-traded on the NASDAQ Global Select Market in the United States and the London Stock Exchange in the United Kingdom. We conduct our operations...

  • Page 104
    ... record our share in the earnings and losses of the companies in which we have an investment and such investments are generally reflected in the consolidated balance sheet at historical cost. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make...

  • Page 105
    ... required in interpreting market data to develop the estimates of fair value. The estimates presented in these consolidated financial statements are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation...

  • Page 106
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 2-Significant Accounting Policies (Continued) recoverability. The movements in our allowance for doubtful accounts for the years ended December 31, 2009, 2008 and 2007 are as follows (in millions): Year ...

  • Page 107
    ... the impairment test of goodwill during the years ended December 31, 2008 and 2007, we established the following reporting units: Cable, Mobile, Virgin Media TV and sit-up. We compared the fair value of the reporting unit to its carrying amount on an annual basis to determine if there was potential...

  • Page 108
    ... the former Virgin Media TV reporting unit, is evaluated for impairment purposes as at June 30, while the Consumer and Business reporting units are evaluated as at October 1, each year. Intangible assets include trademark license agreements and customer lists. Trademark license agreements represent...

  • Page 109
    .... Fixed line telephone, cable television and internet revenues are recognized as the services are provided to customers. At the end of each period, adjustments are recorded to defer revenue relating to services billed in advance and to accrue for earned but unbilled services. Installation revenues...

  • Page 110
    ... an accrual basis over employees' approximate service periods. Pension expense calculated is generally independent of funding decisions or requirements. We recognize the funded status of our defined benefit postretirement plans on our balance sheet, and changes in the funded status are reflected in...

  • Page 111
    ... volatility in future cash flows and earnings associated with foreign currency payments in relation to operating costs and purchases of fixed assets incurred in the normal course of business. Our objective in managing exposure to fluctuations in interest rates and foreign currency exchange rates is...

  • Page 112
    ...), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force (EITF), and related literature. After September 15, 2009, only one level of authoritative U.S. GAAP exists. All other literature will be considered non-authoritative. The ASC does not change...

  • Page 113
    ..., effective for financial statements issued for all periods ending after June 15, 2009. The guidance establishes general standards of accounting for, and requires disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued...

  • Page 114
    ... and we adjusted the balance sheet as of December 31, 2008 and statement of operations for the years ended December 31, 2008 and 2007 accordingly. Revenue of the sit-up business, reported in discontinued operations, for the years ended December 31, 2009, 2008 and 2007 was £38.9 million, £241...

  • Page 115
    ... sit-up is limited to the loan note and carriage agreement and is therefore not considered significant. The loan note was repaid during the year ended December 31, 2009. As at December 31, 2008, we performed an interim goodwill impairment review of our sit-up reporting unit. In September 2008, we...

  • Page 116
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 5-Fixed Assets (Including Leases) Fixed assets consist of (in millions): December 31, 2009 Useful Economic Life Under Capital Leases 2008 Under Capital Leases Total Total Operating equipment Cable ...

  • Page 117
    ... FINANCIAL STATEMENTS (Continued) Note 5-Fixed Assets (Including Leases) (Continued) Future minimum annual payments under capital and operating leases at December 31, 2009 are as follows (in millions). The table reflects our contractual obligations. Capital Leases Operating Leases Year ending...

  • Page 118
    ...£205.9 million and £54.0 million are allocated to our Consumer, Business and Content reporting units, respectively. We performed our annual impairment review of our Content reporting unit as at June 30, 2009. As a result of this review we concluded that no impairment charge was required as at June...

  • Page 119
    ... using from February 10, 2010. As at June 30, 2008, we performed our annual impairment review of the goodwill recognized in the Virgin Media TV and former Mobile reporting units. The fair value of these reporting units were determined through the use of a combination of both the market and income...

  • Page 120
    ...TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 7-Investments (Continued) Investments consist of (in millions): December 31, 2009 2008 Loans and redeemable preference shares ...Share of net assets ... £129.3 230.6 £359.9 £137.7 215.8 £353.5 Note 8-Long Term Debt Long term debt consists...

  • Page 121
    ... Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by VMIH and VMI. We used the net proceeds, together with cash on hand, to make repayments totaling £658.8 million on our senior notes due 2014. Subsequent to the year end...

  • Page 122
    ...certain cash dividends or distributions or stock repurchases where the price exceeds market values. In the event of specified fundamental changes relating to Virgin Media Inc., referred to as ''make whole'' fundamental changes, the conversion rate will be increased as provided by a formula set forth...

  • Page 123
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 8-Long Term Debt (Continued) debt borrowing rate. As a result, the liability component is recorded at a discount reflecting its below market coupon interest rate, and is subsequently accreted to its par ...

  • Page 124
    ... governing the senior notes and the senior credit facility significantly restrict the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. In addition, the agreements significantly, and, in some cases, absolutely restrict our ability and the ability...

  • Page 125
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 8-Long Term Debt (Continued) Long term debt repayments, excluding capital leases, as of December 31, 2009, are due as follows (in millions): Year ending December 31: 2010 ...2011 ...2012 ...2013 ...2014 ...

  • Page 126
    ... non-performance risk. Accordingly, the inputs used to value these debt instruments are classified within level 1 of the fair value hierarchy. The carrying amounts and fair values of our long term debt are as follows (in millions): December 31, 2009 Carrying Fair Amount Value December 31, 2008...

  • Page 127
    ... risk on our cash balances. Concentrations of credit risk with respect to trade receivables are limited because of the large number of customers and their dispersion across geographic areas. We perform periodic credit evaluations of our Business segment customers' financial condition and generally...

  • Page 128
    ... to be highly effective in offsetting changes in cash flow or fair value attributable to the hedged risk. The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using counterparty valuations, or market transactions in either the listed or...

  • Page 129
    ...Rate Swaps-Hedging the Interest Payments of Senior Notes and Senior Credit Facility As of December 31, 2009, we had outstanding cross-currency interest rate swaps to mitigate the interest and foreign exchange rate risks relating to the pound sterling value of interest payments on the U.S. dollar and...

  • Page 130
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 10-Derivative Financial Instruments and Hedging Activities (Continued) The terms of our outstanding cross-currency interest rate swaps at December 31, 2009 were as follows: Notional amount Notional amount...

  • Page 131
    ... variability in future cash flows on the interest payments associated with our senior credit facility, which accrue at variable rates based on LIBOR. The interest rate swaps allow us to receive interest based on three month LIBOR in exchange for payments of interest at fixed rates. The terms of our...

  • Page 132
    ... stock, restricted stock units and stock awards. Under the Virgin Media Inc. 2006 Stock Incentive Plan, options to purchase up to 29.0 million shares of our common stock may be granted from time to time to certain of our employees. Accordingly, we have reserved 29.0 million shares of common stock...

  • Page 133
    ...pursuant to the stock incentive plans and the Virgin Media Sharesave Plan, and of the changes during the year ended December 31, 2009, is given below. Stock Incentive Plans Non-performance Performance Based Based Virgin Media Sharesave Plan Weighted Average Excise Price Total Outstanding-beginning...

  • Page 134
    ... range. The total fair value of shares of restricted stock vested during the years ended December 31, 2009, 2008 and 2007, was £0.4 million, £2.9 million and £7.9 million, respectively. Restricted Stock Unit Grants Participants in the our long term incentive plans are awarded restricted stock...

  • Page 135
    ... Non-vested-end of year ... The restricted stock units that vested during the years ended December 31, 2009, 2008, 2007 had total fair value of £0.7 million, nil and nil, respectively. Note 12-Employee Benefit Plans Defined Benefit Plans Certain of our subsidiaries operate defined benefit pension...

  • Page 136
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 12-Employee Benefit Plans (Continued) Obligations and Funded Status The change in projected benefit obligation was as follows (in millions): Year ended December 31, 2009 2008 Benefit obligation at ...

  • Page 137
    ... the net periodic benefit cost for the year ended December 31, 2010. Net Periodic Benefit Costs The components of net periodic benefit costs were as follows (in millions): Year ended December 31, 2009 2008 2007 Service cost ...Interest cost ...Expected return on plan Plan settlements ... ...assets...

  • Page 138
    ... used to determine net periodic benefit costs were as follows: December 31, 2009 2008 Discount rate ...Expected long term rate of return on plan assets ...Rate of compensation increase ... 5.75% 5.75% 5.92% 6.68% 3.00% 3.50% Where investments are held in bonds and cash, the expected long term...

  • Page 139
    ... and the improvement in the funding position. There were no directly owned shares of our common stock included in the equity securities at December 31, 2009 or 2008. Estimated Future Benefit Payments The benefits expected to be paid out of the pension plans in total are set out below for each of...

  • Page 140
    ... FINANCIAL STATEMENTS (Continued) Note 13-Restructuring and other charges (Continued) The following table summarizes, for the years ended December 31, 2009, 2008 and 2007, our historical restructuring accruals, the restructuring accruals resulting from the acquisitions made by us during 2006...

  • Page 141
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 14-Income Taxes The benefit (expense) for income taxes consists of the following (in millions): Year ended December 31, 2009 2008 2007 Current: Federal ...State and local ...Foreign ...Total current ......

  • Page 142
    ... summarizes the movements in our deferred tax valuation allowance during the years ended December 31, 2009, 2008 and 2007 (in millions): Year ended December 31, 2009 2008 2007 Balance, January 1 ...Effect of changes in tax rates ...Increase in UK and US deferred tax attributes, inclusive of foreign...

  • Page 143
    ... tax benefits is as follows (in millions): 2009 2008 Balance at January 1, ...Additions based on tax positions related to the current year Additions for tax provisions of prior years ...Reductions for tax provisions of prior years ...Reductions for lapse of applicable statute of limitation...

  • Page 144
    ... Limited is for a 30-year term and exclusive to us within the U.K. and Ireland. The license entitles us to use the ''Virgin'' name for the TV, broadband internet, telephone and mobile phone services we provide to our residential customers, as well as the acquisition and branding of sports, movies...

  • Page 145
    ..., as a related party to us. We had agreements with Virgin Retail Limited in respect to sales of our communications services (such as internet, television, fixed line telephone and mobile telephone services), through the various Virgin Megastores outlets. On September 17, 2007, the Virgin Group sold...

  • Page 146
    ... rights to dividends as declared by the Board of Directors. The following table summarizes the movement in the number of shares of common stock outstanding during the years ended December 31, 2007, 2008 and 2009 (in millions,): Number of shares December 31, 2006 outstanding shares ...Net issuances...

  • Page 147
    ... 25,769,060 shares of our common stock at an exercise price of $105.17 per share. The Series A warrants expire on January 10, 2011. The agreement governing the Series A warrants is governed by New York law. The Series A warrants are listed on the NASDAQ Global Select Market under the symbol ''VMEDW...

  • Page 148
    ... reporting structure and the related financial information used by management and the CODM. Our operating structures have been revised to build a customer-focused organization able to respond effectively to rapid changes in the market, technology and customer demands through our three new customer...

  • Page 149
    ... portfolio of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K. We operate our Content segment through Virgin Media TV, which supplies television programming to the U.K. pay-television broadcasting market. Segment contribution...

  • Page 150
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 18-Industry Segments (Continued) The reconciliation of total segment contribution to our consolidated operating income (loss) is as follows (in millions): Year ended December 31, 2009 2008 2007 Total ...

  • Page 151
    ...present the following condensed consolidated financial information as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008, and 2007 as required by Article 3-10(d) of Regulation S-X. December 31, 2009 Virgin Media Other Company Finance guarantors £ 12.4 - 4.3 16.7 - - 1,977...

  • Page 152
    ... STATEMENTS (Continued) Note 19-Condensed Consolidated Financial Information (Continued) December 31, 2008 Virgin Media Finance Other guarantors All other VMIH subsidiaries Adjustments (in millions) Balance sheets Company Total Cash and cash equivalents . Restricted cash ...Other current...

  • Page 153
    ... (Continued) Note 19-Condensed Consolidated Financial Information (Continued) Year ended December 31, 2009 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (in millions) Statements of operations Total Revenue ...Operating costs ...Selling, general and...

  • Page 154
    ... (Continued) Note 19-Condensed Consolidated Financial Information (Continued) Year ended December 31, 2008 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (in millions) Statements of operations Total Revenue ...Operating costs ...Selling, general and...

  • Page 155
    ... (Continued) Note 19-Condensed Consolidated Financial Information (Continued) Year ended December 31, 2007 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (in millions) Statements of operations Total Revenue ...Operating costs ...Selling, general and...

  • Page 156
    ... on loans to group companies ...Proceeds from the sale of fixed assets ...Purchase of investments ...Disposal of sit-up, net ...Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing activities Proceeds from employee stock option exercises...

  • Page 157
    ... Financial Information (Continued) Year ended December 31, 2008 Virgin All Media Other Other Company Finance Guarantors VMIH subsidiaries Adjustments (in millions) Statement of cash flows Total Net cash provided by (used in) operating activities ...Investing activities: Purchase of fixed...

  • Page 158
    ...) Year ended December 31, 2007 Virgin All Media Other Other Company Finance guarantors VMIH subsidiaries Adjustments (in millions) Statement of cash flows Total Net cash provided by (used in) operating activities ...Investing activities: Purchase of fixed and intangible assets . . Acquisitions...

  • Page 159
    ... of senior secured notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States to certain non-U.S. persons pursuant to Regulation S under the Securities Act. The notes were issued by Virgin Media Secured Finance PLC in...

  • Page 160
    VIRGIN MEDIA INC. SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEET (in millions, except par value) December 31, 2009 2008 Assets Current assets Cash and cash equivalents ...Other current assets ...Total current assets Fixed assets, net ...Investments in and loans ...

  • Page 161
    VIRGIN MEDIA INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF OPERATIONS (in millions) Year ended December 31, 2009 2008 2007 Costs and expenses General and administrative expenses ...Restructuring and other charges ...Operating loss ...Other income (expense) Interest income and ...

  • Page 162
    VIRGIN MEDIA INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF CASH FLOWS (in millions) Year ended December 31, 2009 2008 2007 Net cash used in operating activities ...Investing activities Principal (drawdowns) repayments on loans to group companies ...Net cash (used in) provided by ...

  • Page 163
    ... undistributed earnings of the subsidiaries. Our share of net loss of our subsidiaries is included in net loss using the equity method of accounting. The condensed financial statements should be read in conjunction with our consolidated financial statements. In May 2008, the FASB issued new guidance...

  • Page 164
    ... our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to...

  • Page 165
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except share data) December 31, 2009 2008 Assets Current assets Cash and cash equivalents ...Restricted cash ...Accounts receivable-trade, less allowances Inventory for resale ...Programming inventory...

  • Page 166
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions) Year ended December 31, 2009 2008 2007 Revenue ...Costs and expenses Operating costs (exclusive of depreciation shown separately below) Selling, general and administrative expenses ......

  • Page 167
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year ended December 31, 2009 2008 2007 Operating activities Net loss ...Loss from discontinued operations ...Loss from continuing operations ...Adjustments to reconcile net loss from ...

  • Page 168
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions, except share data) Accumulated Other Comprehensive Income (Loss) Share Capital £0.001 Par Value Shares Net Additional Foreign Pension (Losses) Paid-In Comprehensive Currency ...

  • Page 169
    ... pre-pay mobile customers and nearly one million contract mobile customers over third party networks In addition, we provide a complete portfolio of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K. through Virgin Media Business...

  • Page 170
    ... we have retrospectively adjusted the balance sheet as of December 31, 2008 and statements of operations, cash flows and shareholders' equity for the years ended December 31, 2008 and 2007. Principles of Consolidation The consolidated financial statements include the accounts for us and our wholly...

  • Page 171
    ... collection experience and future expectations of conditions that might impact recoverability. The movements in our allowance for doubtful accounts for the years ended December 31, 2009, 2008 and 2007 are as follows (in millions): Year ended December 31, 2009 2008 2007 Balance, January 1 ...Charged...

  • Page 172
    ... the design and installation of our operating network equipment and facilities. Costs associated with initial customer installations, additions of network equipment necessary to enable enhanced services, acquisition of additional fixed assets and replacement of existing fixed assets are capitalized...

  • Page 173
    ... the impairment test of goodwill during the years ended December 31, 2008 and 2007, we established the following reporting units: Cable, Mobile, Virgin Media TV and sit-up. We compared the fair value of the reporting unit to its carrying amount on an annual basis to determine if there was potential...

  • Page 174
    .... Fixed line telephone, cable television and internet revenues are recognized as the services are provided to customers. At the end of each period, adjustments are recorded to defer revenue relating to services billed in advance and to accrue for earned but unbilled services. Installation revenues...

  • Page 175
    ... part of a periodic billing cycle. Service revenues are recognized as the services are provided. At the end of each period, adjustments are recorded to defer revenue relating to services billed in advance and to accrue for earned but unbilled services. Contract customers are billed in arrears based...

  • Page 176
    ... volatility in future cash flows and earnings associated with foreign currency payments in relation to operating costs and purchase of fixed assets incurred in the normal course of business. Our objective in managing our exposure to fluctuations in interest rates and foreign currency exchange rates...

  • Page 177
    ...), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force (EITF), and related literature. After September 15, 2009, only one level of authoritative U.S. GAAP exists. All other literature will be considered non-authoritative. The ASC does not change...

  • Page 178
    ... that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted this guidance during the second quarter of 2009. In September 2009, the FASB ratified new accounting guidance for existing multiple-element revenue arrangements. The revised...

  • Page 179
    ... sit-up is limited to the loan note and carriage agreement and is therefore not considered significant. The loan note was repaid during the year ended December 31, 2009. As at December 31, 2008, we performed an interim goodwill impairment review of our sit-up reporting unit. In September 2008, we...

  • Page 180
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 4-Disposals (Continued) The fair value of the sit-up reporting unit, which was determined through the use of a combination of both the market and income approaches to calculate fair...

  • Page 181
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 5-Fixed Assets (Including Leases) (Continued) Future minimum annual payments under capital and operating leases at December 31, 2009 are as follows (in millions). The table reflects...

  • Page 182
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 6-Goodwill and Intangible Assets Goodwill and intangible assets consist of (in millions): Estimated Useful Life December 31, 2009 2008 Goodwill and intangible assets not subject to...

  • Page 183
    ... using from February 10, 2010. As at June 30, 2008, we performed our annual impairment review of the goodwill recognized in the Virgin Media TV and former Mobile reporting units. The fair value of these reporting units were determined through the use of a combination of both the market and income...

  • Page 184
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 7-Investments (Continued) Investments consist of (in millions): December 31, 2009 2008 Loans and redeemable preference shares ...Share of net assets ... £129.3 230.6 £359.9 £...

  • Page 185
    ...rate loan notes was 5.3% and 9.8% as at December 31, 2009 and 2008, respectively. The terms of the senior notes and senior credit facility as at December 31, 2009 are summarized below. Senior Notes Our parent, Virgin Media Finance PLC, issued senior notes due 2014 on April 13, 2004. On July 25, 2006...

  • Page 186
    ..., Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by us and VMI. We used the net proceeds to make repayments totaling 658.8 million on our senior notes due 2014. Subsequent to the year end, on January 19, 2010, our...

  • Page 187
    ... HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 8-Long Term Debt (Continued) to June 2012, extend the maturity of over 72.3% of the existing revolving facility from March 2011 to June 2012 and reset certain financial covenant ratios. These changes...

  • Page 188
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 8-Long Term Debt (Continued) On a pro forma basis taking into account the issuance of the senior secured notes on January 19, 2010 and the related repayment of our senior credit ...

  • Page 189
    ... within level 1 of the fair value hierarchy. The carrying amounts and fair values of our long term debt are as follows (in millions): December 31, 2009 Carrying Fair Amount Value December 31, 2008 Carrying Fair Amount Value Senior credit facility ...8.75% U.S. dollar loan notes due 2014* . . 9.75...

  • Page 190
    ...risk with respect to derivative contracts are focused within a limited number of international financial institutions with which we operate and relate only to derivatives with recorded asset balances at December 31, 2009. We perform regular reviews of the financial institutions with which we operate...

  • Page 191
    ... to be highly effective in offsetting changes in cash flow or fair value attributable to the hedged risk. The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using counterparty valuations, or market transactions in either the listed or...

  • Page 192
    ...Rate Swaps-Hedging the Interest Payments of Senior Notes and Senior Credit Facility As of December 31, 2009, we had outstanding cross-currency interest rate swaps to mitigate the interest and foreign exchange rate risks relating to the pound sterling value of interest payments on the U.S. dollar and...

  • Page 193
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 10-Derivative Financial Instruments and Hedging Activities (Continued) The terms of our outstanding cross-currency interest rate swaps at December 31, 2009 were as follows: Notional...

  • Page 194
    ... allow us to receive interest based on three month LIBOR in exchange for payments of interest at fixed rates. The terms of our outstanding interest rate swap contracts at December 31, 2009 were as follows: Hedged item/Maturity date Hedge type Notional amount (in millions) Weighted average interest...

  • Page 195
    ... management of investment groups. The pension cost is calculated using the projected unit method. Our policy is to fund amounts to the defined benefit plans necessary to comply with the funding requirements as prescribed by the laws and regulations in the U.K. Our defined benefit pension plans use...

  • Page 196
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 11-Employee Benefit Plans (Continued) Obligations and Funded Status The change in projected benefit obligation was as follows (in millions): Year ended December 31, 2009 2008 ...

  • Page 197
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 11-Employee Benefit Plans (Continued) The accumulated benefit obligation for all defined benefit plans was £366.6 million and £301.4 million at December 31, 2009 and 2008, ...

  • Page 198
    ... used to determine net periodic benefit costs were as follows: December 31, 2009 2008 Discount rate ...Expected long term rate of return on plan assets ...Rate of compensation increase ... 5.75% 5.92% 3.00% 5.75% 6.68% 3.50% Where investments are held in bonds and cash, the expected long term...

  • Page 199
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 11-Employee Benefit Plans (Continued) December 31, 2009. The assets are managed by a number of fund managers, which means as markets move relative to each other the assets move away...

  • Page 200
    ... to £45 million in connection with this plan over a three-year period. The following table summarizes, for the years ended December 31, 2009, 2008 and 2007, our historical restructuring accruals, the restructuring accruals resulting from the acquisitions made by us during 2006 and the accruals for...

  • Page 201
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 13-Income Taxes The benefit (expense) for income taxes consists of the following (in millions): Year ended December 31, 2009 2008 2007 Current: U.K. taxes ...Total current ......

  • Page 202
    ...tax valuation allowance during the years ended December 31, 2009, 2008 and 2007 (in millions): Year ended December 31, 2009 2008 2007 Balance, January 1 ...Acquisitions ...Effect of changes in tax rates ...Increase in UK deferred tax attributes ... ... ... ... ... ... ... ... ... £6,445.1 - - 167...

  • Page 203
    ... tax benefits is as follows (in millions): 2009 2008 Balance at January 1, ...Additions based on tax positions related to the current year Additions for tax provisions of prior years ...Reductions for tax provisions of prior years ...Reductions for lapse of applicable statute of limitation...

  • Page 204
    ... related party to us. Virgin Entertainment Investment Holdings Limited became a holder of Virgin Media Inc's common stock as a result of its acquisition of Virgin Mobile on July 4, 2006. As of December 31, 2009, Virgin Entertainment Investment Holdings Limited beneficially owned 6.5% of Virgin Media...

  • Page 205
    ..., as a related party to us. We had agreements with Virgin Retail Limited in respect to sales of our communications services (such as internet, television, fixed line telephone and mobile telephone services), through the various Virgin Megastores outlets. On September 17, 2007, the Virgin Group sold...

  • Page 206
    ... million and £353.5 million, respectively. We pay UKTV for purchases of television programming rights and receive payments in respect of advertising and other business support services provided to UKTV. During the year ended December 31, 2009, 2008 and 2007, the net expense recognized in respect to...

  • Page 207
    ...of 2008, Virgin Media realigned its internal reporting structure and the related financial information used by management and the CODM. These have been revised to build a customer-focused organization able to respond effectively to rapid changes in the market, technology and consumer demands through...

  • Page 208
    ... of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K. Virgin Media operates its Content segment through Virgin Media TV, which supplies television programming to the U.K. pay-television broadcasting market. Segment contribution...

  • Page 209
    ... of senior secured notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States to certain non-U.S. persons pursuant to Regulation S under the Securities Act. The notes were issued by Virgin Media Secured Finance PLC in...

  • Page 210
    ... our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to...

  • Page 211
    VIRGIN MEDIA INVESTMENTS LIMITED BALANCE SHEET (in pounds sterling, except share data) December 31, 2009 Assets Due from Virgin Media Investment Holdings Limited ...Total assets ...Shareholder's Equity Common stock-£1 par value, issued and outstanding 2 ordinary shares ...Total shareholder's ...

  • Page 212
    VIRGIN MEDIA INVESTMENTS LIMITED STATEMENT OF SHAREHOLDERS' EQUITY (in pounds sterling) Common Stock £1 Par Value Additional Paid-in Capital Total Balance, December 18 , 2009 (inception) ...Issuance of common stock ...Balance, December 31, 2009 ... £ - 2 £ 2 £ - - £ - £ - 2 £ 2 F-116

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    ... holding company. The initially invested common stock of £2 was settled as part of the consideration received from VMIH on January 1, 2010. VMIL had no operations or cash flows for the period from December 18, 2009, through December 31, 2009. Under the terms of the indentures governing Virgin Media...

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    ... existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force (EITF), and related literature. After September 15, 2009, only one level of authoritative U.S. GAAP exists. All other literature is considered non-authoritative. The ASC does not change U.S. GAAP...

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    ...that occur after the balance sheet date but before financial statements are issued or are available to be issued. We have adopted the disclosure requirements of this guidance. In September 2009, the FASB ratified new accounting guidance for existing multiple-element revenue arrangements. The revised...

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    ... Neil A. Berkett Chief Executive Officer Date: February 26, 2010 By: /s/ EAMONN O'HARE Eamonn O'Hare Chief Financial Officer VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED Date: February 26, 2010 By: /s/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer Date: February 26, 2010 By: /s/ EAMONN...

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    ... Chief Executive Officer and Director (principal executive officer) Chief Financial Officer (principal financial officer) Vice President-Controller (principal accounting officer) Director February 26, 2010 By: February 26, 2010 By: February 26, 2010 By: February 26, 2010 By: Director...

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    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED Name Title Date By: /s/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer (principal executive officer) February 26, 2010 By: /s/ EAMONN O'HARE Eamonn O'Hare Chief Financial Officer (principal accounting and financial officer) February 26, 2010...

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    ..., dated April 13, 2004, as amended and restated on December 30, 2009, among Virgin Media Finance PLC as Issuer, Virgin Media Investment Holdings Limited as Borrower and as High Yield Guarantor, Deutsche Bank AG, London Branch as Facility Agent and Bank Group Security Trustee, The Bank of New York as...

  • Page 220
    ... 2008). Indenture, dated as of April 13, 2004, by and among NTL Cable PLC, the Guarantors listed on the signature pages thereto and the Bank of New York, as Trustee (Incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K of Virgin Media Holdings Inc. as filed with the Securities...

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    ...on April 16, 2008). Indenture, dated as of June 3, 2009, among Virgin Media Inc., Virgin Media Finance PLC, Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc., Virgin Media Communications Limited, Virgin Media Investment Holdings Limited, The Bank of New York Mellon as...

  • Page 222
    ...). Schedule to the Virgin Media Inc. 2006 Stock Incentive Plan relating to the Company Share Option Plan (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on January 13, 2010). 10.1 10.2 10.3 10...

  • Page 223
    ...on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on November 8, 2007). Form of Restricted Stock Unit Agreement used for grants by Virgin Media Inc. to its executive officers pursuant to the 2007-2009 Long Term Incentive Plan (Incorporated by reference to Exhibit...

  • Page 224
    ... Non-qualified Stock Option Notice used for grants by Virgin Media Inc. to its executive officers pursuant to the 2010-2012 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission...

  • Page 225
    ... 2008). Service Agreement, dated as of September 16, 2009, between Virgin Media Limited and Eamonn O'Hare (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on September 18, 2009). Non-Qualified Stock...

  • Page 226
    ..., 2006). Form of Incentive Stock Option Notice (to be used for Bryan H. Hall) (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Virgin Media Holdings Inc. as filed with the Securities and Exchange Commission on May 4, 2005). Service Agreement, dated as of July 31, 2009...

  • Page 227
    ... between Telewest Communications Group Limited and Malcolm Wall (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on May 6, 2009). Restricted Stock Agreement, dated as of May 26, 2006, between NTL...

  • Page 228
    ... the Securities and Exchange Commission on November 8, 2007). 10.82 10.83* Trade Mark Licence between Virgin Enterprises Limited and Virgin Media Limited dated December 16, 2009. 10.84 Letter Agreement, dated as of April 3, 2006, between NTL Incorporated and Virgin Enterprises Limited relating to...

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    ... Information Virgin Media Inc. NASDAQ, London Stock Exchange: VMED www.virginmedia.com Corporate Headquarters Virgin Media Inc. 909 Third Avenue Suite 2863 New York, NY 10022 United States Tel: +1 212 906 8440 Head Office Media House Bartley Wood Business Park Hook Hampshire RG27 9UP United Kingdom...

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