Western Union 2006 Annual Report Download - page 41

Management’s Discussion and Analysis of Financial Condition and Results of Operations 39
You should read the following discussion in conjunction
with the consolidated financial statements and the notes
to those statements included elsewhere in this Annual
Report. This Annual Report contains certain statements
that are forward-looking within the meaning of the Private
Securities Litigation Reform Act of 1995. Certain statements
contained in the Management’s Discussion and Analysis
of Financial Condition and Results of Operations are forward-
looking statements that involve risks and uncertainties.
The forward-looking statements are not historical facts,
but rather are based on current expectations, estimates,
assumptions and projections about our industry, business
and future financial results. Our actual results could differ
materially from the results contemplated by these forward-
looking statements due to a number of factors, including
those discussed in other sections of this Annual Report.
See “Forward-Looking Statements.”
|| Overview
We are a leading provider of money transfer services,
operating in two business segments:
|| Consumer-to-consumer money transfer services,
provided primarily through a global network of third-
party agents using our multi-currency, real-time
money transfer processing systems. This service
is available for both international cross-border
transactions — that is, the transfer of funds from one
country to another — and intra-country transfers — that
is, money transfers from one location to another in
the same country.
|| Consumer-to-business payment services, which
allow consumers to send funds to businesses and
other organizations that receive consumer payments,
including utilities, auto finance companies, mortgage
servicers, financial service providers and government
entities (all sometimes referred to as “billers”)
through our network of third-party agents and various
electronic channels.
Businesses not considered part of the segments
described above are categorized as “Other” and generated
approximately 2% of our total consolidated revenue for
the year ended December 31, 2006.
The consumer-to-consumer money transfer service
is available through an extensive network of agent locations
that offer Western Union services around the world. Some
of our agent locations only pay out and do not send money.
In addition to our agent locations, we are expanding the
ability of consumers to send money through other channels,
such as our Internet site, westernunion.com, and the
telephone. Consumer-to-consumer money transfer service
is available through the Western Union,
®
Orlandi Valuta
®
and VigoSM brands, and includes locations offering any of
our three brands.
The consumer-to-business service allows consumers
to transfer money to a biller. This service is available at
many of our Western Union agent locations and in some
instances through the Internet or by telephone primarily
in the United States. In December 2006, we acquired the
remaining 75% interest in Servicio Electrónico de Pago
S.A., and related entities (“SEPSA”), a walk in bill payment
company based in Argentina with more than 3,300 locations.
Prior to the acquisition, we held a 25% interest in SEPSA.
Factors that we believe are important to our long-term
success include international growth by expanding and
diversifying our consumer-to-consumer global distribution
network, building our brands, enhancing the consumer
experience, expanding the channels by which consumers
can send or receive money and diversifying our consumer-
to-consumer service offerings, expanding into new biller
and other business and government relationships, and
expanding the international presence of our consumer-to-
business offerings. Significant factors affecting our financial
position and results of operations include:
|| Transaction volume is the primary generator of
revenue in our businesses. Transaction volume in
our consumer-to-consumer segment is affected by,
among other things, the size of the international
migrant population and individual needs to transfer
funds in emergency situations. We anticipate the
demand for money transfer services will be strong
as individuals continue to migrate to countries outside
of their countries of origin. A reduction in the size
of the migrant population, interruptions in migration
patterns or reduced employment opportunities
including those resulting from any changes in
immigration laws, economic development patterns
or political events, could adversely affect our
transaction volume. For example, during 2006, the
United States to Mexico and United States domestic
businesses, and to a lesser extent United States
outbound businesses, were adversely impacted by
the immigration debate and related activities in the
United States. This controversy around the subject
of immigration and the changes in the approach of
various government entities to the regulation of
businesses that employ or sell to immigrants has
created fear and distrust among some consumers
in the United States. As a result, the frequency of
money transfer transactions involving these consumers
has decreased and some competitors have lowered
prices and foreign exchange spreads in certain markets.
These and other issues adversely affected our
Mexico and United States domestic businesses,
and to a lesser extent our U.S. outbound business
in 2006, and we expect them to continue to impact
our businesses in the future. Certain actions taken
by the State of Arizona with respect to money transfer
service providers have added to the uncertainty of
some of our consumers. For more discussion on
this matter, refer to the consumer-to-consumer
segment discussion below.