Virgin Media 2014 Annual Report Download - page 31

VIRGIN MEDIA INC.
(See note 1)
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2014
(unaudited)
29
Guarantees and Other Credit Enhancements
In the ordinary course of business, we may provide indemnifications to our lenders, our vendors and certain other parties and
performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have
not resulted in our company making any material payments and we do not believe that they will result in material payments in the
future.
Legal and Regulatory Proceedings and Other Contingencies
VAT Matter. Our application of the VAT with respect to certain revenue generating activities has been challenged by the U.K.
tax authorities. We have estimated our maximum exposure in the event of an unfavorable outcome to be £38.3 million as of
June 30, 2014. No portion of this exposure has been accrued by our company as the likelihood of loss is not considered to be
probable. An initial hearing on these matters took place during 2013 but was adjourned with no conclusion. The next hearing is
expected to take place in September 2014.
Other Regulatory Issues. Digital cable distribution, broadband internet, fixed-line telephony and mobile businesses are subject
to significant regulation and supervision by various regulatory bodies in the jurisdictions in which we operate, and other U.K. and
European Union (EU) authorities. Adverse regulatory developments could subject our businesses to a number of risks. Regulation
could limit growth, revenue and the number and types of services offered and could lead to increased operating costs and property
and equipment additions. In addition, regulation may restrict our operations and subject them to further competitive pressure,
including pricing restrictions, interconnect and other access obligations, and restrictions or controls on content, including content
provided by third parties. Failure to comply with current or future regulation could expose our businesses to various penalties.
We have security accreditations across a range of B2B products and services in order to increase our offerings to public sector
organizations in the U.K. These accreditations are granted subject to periodic reviews of our policies and procedures by U.K.
governmental authorities. If we were to fail to maintain these accreditations or obtain new accreditations when required, it could
impact our ability to provide certain offerings to the public sector.
Other. In addition to the foregoing items, we have contingent liabilities related to matters arising in the ordinary course of
business including (i) legal proceedings, (ii) issues involving VAT and wage, property and other tax issues and (iii) disputes over
interconnection, programming, copyright and carriage fees. While we generally expect that the amounts required to satisfy these
contingencies will not materially differ from any estimated amounts we have accrued, no assurance can be given that the resolution
of one or more of these contingencies will not result in a material impact on our results of operations, cash flows or financial
position in any given period. Due, in general, to the complexity of the issues involved and, in certain cases, the lack of a clear
basis for predicting outcomes, we cannot provide a meaningful range of potential losses or cash outflows that might result from
any unfavorable outcomes.
(11) Segment Reporting
We operate in one geographical area, the U.K., within which we provide digital cable, broadband internet, fixed-line telephony
and mobile services to residential and/or business customers.