Virgin Media 2009 Annual Report Download - page 20

During 2009, Carphone Warehouse continued to pursue an aggressive pricing policy for its
TalkTalk fixed telephone line and broadband bundle by standardizing the package and offering
‘‘Boost’’ packages (including higher download speed and additional voice calls), which are each
available at a fixed incremental cost per month. In 2009, Carphone Warehouse announced its
intention to demerge its TalkTalk operations with effect from March 2010. Following the
demerger, the resulting entities, TalkTalk Telecom Group PLC and New Carphone Warehouse
PLC (to be renamed Carphone Warehouse Group plc), will compete in the markets for
broadband and fixed line telephony, and mobile telephony, respectively.
•Orange. Orange offers mobile telephony, mobile broadband, fixed line telephony and broadband
services. In 2009, Orange launched broadband speeds of up to 20 Mbps for those in an enabled
area and began offering a leading, high-end smartphone, currently available on limited networks
in the U.K. In August 2009, France Telecom and Deutsche Telekom announced the intention to
merge Orange UK and T-Mobile UK as a 50/50 joint venture, subject to applicable regulatory
approvals. If completed, the merger would likely result in increased market share and power of
the combined entity primarily in the mobile telephony market.
•O2. O2 offers mobile telephony, mobile broadband and fixed line broadband services. In 2009,
O2 focused its mobile offering around smartphones, attractively priced SIM-only tariffs and its
customer loyalty program. O2 also continued its aggressive pricing strategy on its home
broadband packages and recently announced its intention to enter the fixed line telephony
market in March 2010.
Broadband Internet
Our most significant competitor in the market for broadband internet services is BT, which
provides broadband internet access services over its own DSL network both as a retail brand and as a
wholesale service. An increasing number of companies, such as BSkyB, Carphone Warehouse
(TalkTalk), Orange and O2, are deploying their own network access equipment in BT exchanges via a
process known as local loop unbundling, or LLU. LLU allows an ISP to reduce the recurring operating
costs incurred through BT Wholesale by reducing the proportion of traffic that must travel directly over
BT’s network. LLU deployment requires a substantial capital investment to implement, and requires a
large customer base to deliver 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 arising
from LLU, mobile broadband and technological developments, such as long term evolution, or LTE,
and 3G mobile technology, other wireless technologies, such as Wi-Fi and Wi-Max, may subject us to
increased competition over time in the provision of broadband services.
Cable Television
Our digital television services compete primarily with those of BSkyB. BSkyB is the only pay
satellite television platform in the U.K. and has a high market share of the U.K. pay television market.
BSkyB owns the U.K. rights to both standard definition and HD versions of various sports and movie
programming content, which it has used to create some of the most popular premium pay television
channels in the U.K. BSkyB is therefore both our principal competitor in the pay television market,
and an important supplier of premium television content to us.
Residential customers may also receive digital terrestrial television, or DTT. Digital signals are
delivered to customer homes through a conventional television aerial and a separately purchased set-
top box or an integrated digital television set. The free-to-air DTT service in the U.K. is branded
Freeview. This service is provided by a consortium of operators, including the BBC, and offers
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