Virgin Media 2010 Annual Report Download - page 86

Pension commitments have been excluded from the above table. For the year ended December 31, 2011, we
anticipate contributing a total of £17.4 million to fund our defined benefit pension plans. Funding commitments
beyond 2011 will not be known until completion of the next triennial valuations, which is expected to be in the
first half of 2012.
Early termination charges are amounts that would be payable in the above periods in the event of early
termination during that period of certain of the contracts underlying the purchase obligations listed above.
The following table includes information about our commercial commitments as of December 31, 2010.
Commercial commitments are items that we could be obligated to pay in the future. They are not required to be
included in the consolidated balance sheet (in millions):
Amount of Commitment Expiration per Period
Other Commercial Commitments Total
Less than
1 year 1–3 years 3–5 years
More than
5 years
Guarantees ......................................... £— £— £— £— £—
Lines of credit ...................................... — — — — —
Standby letters of credit .............................. 17.0 14.9 — — 2.1
Standby repurchase obligations ........................ — — — — —
Other commercial commitments ........................ — — — — —
Total commercial commitments ........................ £17.0 £14.9 £ £— £ 2.1
Derivative Instruments and Hedging Activities
We have a number of derivative instruments with a number of counterparties to manage our exposures to
changes in interest rates and foreign currency exchange rates. We account for certain of these instruments as
accounting hedges, in accordance with the Derivatives and Hedging Topic of the FASB ASC, when the
appropriate eligibility criteria has been satisfied, and to the extent that they are effective. Ineffectiveness in our
accounting hedges, and instruments that we have not elected for hedge accounting, are recognized through the
consolidated statement of operations immediately. Effective cash flow accounting hedges are recognized as
either assets or liabilities and measured at fair value with changes in the fair value recorded within other
comprehensive income (loss). The derivative instruments consist of interest rate swaps, cross-currency interest
rate swaps and foreign currency forward contracts.
We are also subject to interest rate risks. Before taking into account the impact of current hedging
arrangements, as of December 31, 2010, we would have had interest determined on a variable basis on
£1,675 million, or 27.8%, of our long term debt. An increase in interest rates of 1% would increase unhedged
gross interest expense by approximately £16.7 million per year.
We are also subject to currency exchange rate risks because substantially all of our revenues, operating costs
and selling, general and administrative expenses are paid in U.K. pounds sterling, but we pay interest and
principal obligations with respect to a portion of our indebtedness in U.S. dollars and euros. To the extent that the
pound sterling declines in value against the U.S. dollar and the euro, the effective cost of servicing our
U.S. dollar and euro denominated debt will be higher. Changes in the exchange rate result in foreign currency
gains or losses. As of December 31, 2010, £2,884.8 million, or 46.6%, of our indebtedness based upon
contractual obligations, was denominated in U.S. dollars and £154.3 million, or 2.5%, of our indebtedness based
upon contractual obligations, was denominated in euros. We also purchase goods and services in U.S. dollars,
euros and South African rand.
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