Virgin Media 2013 Annual Report Download - page 20

I - 18
illicit piracy of television, broadband and telephony services are continually being developed in response to evolving technologies.
Furthermore, 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 could 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
reliant on them in a way that 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.
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 may 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 results of operations could be materially adversely affected.
Our consumer mobile service relies on EE’s network to carry its communications traffic. Our services to mobile customers
rely on our MVNO agreement with EE for voice, non-voice and other telecommunications services and for ancillary services such
as pre-pay account management. If the agreement with EE is terminated, if EE fails to provide the services required under the
agreement, or if EE fails to deploy and maintain its network, and we are unable to find a replacement network operator on a timely
and commercial basis (if at all), we could be prevented from continuing our mobile business. If we find a replacement network
operator, we may only be able to continue our mobile business on less favorable terms. Additionally, migration of all or some of
our customer base to any such replacement network operator would be dependent in part on EE and could entail potential technical
or commercial risk. If any of this were to happen, this could have a material adverse effect on our business and results of operations.
EE is also a customer of our B2B operations. Any disagreements between EE and our mobile operations or between EE and
our B2B operations could have a material adverse effect on the relationship of the other Virgin Media businesses and EE.
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 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
licensee of the “Virgin” name and logo (particularly in the U.K.) could have a material adverse effect on our reputation, business
and results of operations. In addition, the licenses from Virgin Enterprises Limited can be terminated in certain circumstances.
For example, Virgin Enterprises Limited can terminate the licenses, after providing Virgin Media with an opportunity to cure, (i)
if Virgin Media or any of its affiliates commits persistent and material breaches or a flagrant and material breach of the licenses,
(ii) if Virgin Enterprises Limited has reasonable grounds to believe that the use (or lack of use) of the licensed trademarks by
Virgin Media has been or is likely to result in a long-term and material diminution in the value of the “Virgin” brand, or (iii) if a
third party who is not (or one of whose directors is not) a “fit and proper person,” such as a legally disqualified director or a
bankrupt entity, acquires “control” of Liberty Global. Such a termination could have a material adverse effect on our business and
results of operations.
We depend almost exclusively on our relationships with third-party programming providers and broadcasters for
programming content, and a failure to acquire a wide selection of popular programming on acceptable terms could
adversely affect our business. We enter into agreements for the provision of television programs and channels distributed via
our entertainment service with program providers, such as public and commercial broadcasters, or providers of pay or on-
demand television. We have historically obtained a significant amount of our premium programming and some of our basic
programming and pay per view sporting events from BSkyB. BSkyB is also one of our main competitors in the television
services business. BSkyB is a leading supplier of programming to pay television platforms in the U.K. and is the exclusive
supplier of some programming, including its Sky Sports channels and Sky Movies channels, which are the most popular
premium subscription sports and film channels available in the U.K.