Virgin Media 2010 Annual Report Download - page 29

to encrypt pay television to our customers. However, increasingly sophisticated means of illicit piracy of
television services are continually being developed, including in response to evolving technologies. Billing and
revenue generation for our pay television services rely on the proper functioning of our encryption systems.
While we continue to invest in measures to manage unauthorized access to our networks, any such unauthorized
access to our cable television service would result in a loss of revenue, and any failure to respond to security
breaches could raise concerns under our agreements with content providers, all of which could have a material
adverse effect on our business and results of operations.
We rely on third-party suppliers and contractors to provide necessary hardware, software or operational
support and are sometimes tied in to them in a way which could economically disadvantage us.
We rely on third-party vendors to supply us with a significant amount of customer equipment, hardware,
software and operational support necessary to operate our network and systems and provide our services. In
many cases, we have made substantial investments in the equipment or software of a particular supplier, making
it difficult for us in the short term to change supply and maintenance relationships in the event that our initial
supplier is unwilling or unable to offer us competitive prices or to provide the equipment, software or support
that we require. If our suppliers and contractors seek to charge us prices that are not competitive, the ties we have
to them may be such that we may be paying more than we have to for products and services in the short and even
medium term.
We also rely upon a number of third-party contractors to construct and maintain our network and to install
our equipment in customers’ homes. Quality issues or installation or service delays relating to these contractors
could result in liability, reputational harm or contribute to customer dissatisfaction, which could result in
additional churn or discourage potential new customers.
We are also exposed to risks associated with the potential financial instability of our suppliers, some of
whom have been adversely affected by the global economic downturn. If our suppliers were to discontinue
certain products, were unable to provide equipment to meet our specifications or interrupt the provision of
equipment or services to us, whether as a result of bankruptcy or otherwise, our business and profitability could
be materially adversely affected.
Our marketing depends in significant part on the “Virgin” name and logo, but we do not own these.
We do not own the “Virgin” name and logo. We use the “Virgin” name and logo in connection with our
corporate activities and the activities of our consumer and business operations under a 30-year license agreement
with Virgin Enterprises Limited. The license agreement expires in April 2036, and we are obligated to pay a
termination payment if the license is terminated early under certain circumstances. The license also requires us to
meet certain customer service level requirements which may be difficult to achieve, particularly during periods of
growth and change when such service levels may be adversely affected. If we fail to meet our obligations under
the license agreement, this could lead to a termination of the license. If we lose the right to use the Virgin brand,
we would need to rebrand the affected areas of our business, which could result in increased expenditures and
increased customer churn which in turn could have a material adverse effect on our business and results of
operations.
The “Virgin” brand is not under our control and the activities of the Virgin Group and other licensees could
have a material adverse effect on the goodwill of customers towards us as a licensee.
The “Virgin” brand is integral to our corporate identity. We are substantially reliant on the general goodwill
of consumers towards the Virgin brand. Consequently, adverse publicity in relation to the Virgin Group or its
principals, particularly Sir Richard Branson, who is closely associated with the brand, or in relation to another
Virgin name licensee, could have a material adverse effect on our business. Similarly, any negative publicity
26