Virgin Media 2010 Annual Report Download - page 33

accounting standards and changes in accounting standards, and future changes in the law. As we operate in more
than one tax jurisdiction and may therefore incur losses in one jurisdiction that cannot be offset against income
earned in a different jurisdiction, we may pay income taxes in one jurisdiction for a particular period even though
on an overall basis we incur a net loss for that period.
We have a U.S. holding company structure in which substantially all of our operations are conducted in
U.K. subsidiaries that are owned by one or more members of a U.S. holding company group. As a result,
although we do not expect to have current U.K. tax liabilities on our operating earnings for at least the medium
term, our operations may give rise to U.S. tax on “Subpart F” income generated by our U.K. subsidiaries, or on
repatriations of cash from our U.K. operating subsidiaries to the U.S. holding company group. While we believe
that we have substantial U.S. tax basis in some of our U.K. subsidiaries which may be available to avoid or
reduce U.S. tax on repatriation of cash from our U.K. subsidiaries, there can be no assurance that the Internal
Revenue Service, or IRS, will not seek to challenge the amount of that tax basis or that we will be able to utilize
such basis under applicable tax law. As a result, although in accordance with applicable law we will seek to
minimize our U.S. tax liability as well as our overall worldwide tax liability, we may incur U.S. tax liabilities
with respect to repatriation of cash from our U.K. subsidiaries to the United States. The amount of the tax
liability, if any, would depend upon a multitude of factors, including the amount of cash actually repatriated.
We also pay value added tax, or VAT, on our revenue generating activities in the U.K. From time to time,
the U.K. tax authorities review the basis upon which we assess our VAT liability with respect to our activities.
We are currently engaged in a dispute with the tax authorities over two of these reviews. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Results of
Operations—Consolidated Results of Operations for the Years Ended December 31, 2010 and 2009—Contingent
Losses.”
Acquisitions and other strategic transactions present many risks, and we may not realize the financial and
strategic goals that were contemplated at the time of any transaction.
From time to time we have made acquisitions, dispositions and have entered into other strategic
transactions. In connection with such transactions, we may incur unanticipated expenses, fail to realize
anticipated benefits, have difficulty integrating the acquired businesses, disrupt relationships with current and
new employees, customers and suppliers, incur significant indebtedness, or have to delay or not proceed with
announced transactions. These factors could have a material adverse effect on our business and our reputation.
Virgin Mobile relies on Everything Everywhere’s network to carry its communications traffic.
Virgin Mobile relies on its agreement with Everything Everywhere for voice, non-voice and other
telecommunications services we provide to our mobile customers, as well as for certain ancillary services such as
pre-pay account management. If the agreement with Everything Everywhere is terminated, or if Everything
Everywhere fails to deploy and maintain its network, or if Everything Everywhere fails to provide the services as
required under our agreement with them, and we are unable to find a replacement network operator on a timely
and commercial basis, if at all, we could be prevented from carrying on our mobile business or, if we found a
replacement operator, we may be able to carry on our mobile business only on less favorable terms or provide
less desirable services. Additionally, any migration of all or some of our customer base to a new operator would
be in part dependent on Everything Everywhere and could entail potential technical or commercial risk.
Everything Everywhere is also a customer of our business division. Any disagreements between Everything
Everywhere and Virgin Mobile could adversely affect our other relationships with Everything Everywhere which
could have a material adverse effect on our business and results of operation.
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