Western Union 2010 Annual Report Download - page 32

companies, from agreeing to exclusive arrangements with agents in those countries. Certain institutions, non-
governmental organizations (NGOs) and others are actively advocating against exclusive arrangements in money
transfer agent agreements. Advocates for laws prohibiting or limiting exclusivity continue to push for enactment of
similar laws in other jurisdictions. In addition, certain of our agents and subagents have refused to enter into
exclusive arrangements. The inability to enter into exclusive arrangements or to enforce our exclusivity rights under
our contracts could adversely affect our operations and revenue by, for example, allowing competitors to benefit
from the goodwill associated with the Western Union brand at our agent locations.
We have relationships with more than 6,400 businesses to which our customers can make payments. These
relationships are a core component of our global business payments services, and we derive a substantial portion of
our global business payments revenue through these relationships. If we are unable to sign new relationships or
maintain our current relationships under terms consistent with those currently in place, our revenue and profit
growth rates may be adversely affected.
Our business, financial position and results of operations could be harmed by adverse rating actions by credit
rating agencies.
Currently, each of the major credit rating agencies has given our outstanding indebtedness an investment grade
rating. If our current rating is downgraded, or if a negative outlook is provided by a rating agency, our business,
financial position and results of operations could be adversely affected and perceptions of our financial strength
could be damaged. This could adversely affect our relationships with our agents, particularly those agents that are
financial institutions or post offices. In addition, if a downgrade or a negative outlook is provided by a rating agency,
it could result in regulators imposing additional capital and other requirements on us, including imposing
restrictions on the ability of our regulated subsidiaries to pay dividends. Also, a significant downgrade could
increase our costs of borrowing money, adversely affecting our business, financial position and results of
operations.
We face competition from global and niche or corridor money transfer providers, United States and international
banks, card associations, card-based payments providers and a number of other types of service providers,
including electronic and internet providers. Our continued growth depends on our ability to compete effectively
in the industry.
Money transfer and global business payments are highly competitive industries which include service providers
from a variety of financial and non-financial business groups. Our competitors include banks, credit unions, ATM
providers and operators, card associations, card-based payments providers such as issuers of e-money, travel cards
or stored-value cards, informal remittance systems, web-based services, telephone payment systems (including
mobile phone networks), postal organizations, retailers, check cashers, mail and courier services, currency
exchanges and traditional money transfer companies. These services are differentiated by features and
functionalities such as speed, convenience, network size, hours of operations, loyalty programs, reliability and
price. Our continued growth depends on our ability to compete effectively in these industries. We have made
periodic pricing decreases in response to competition and to implement our brand investment strategy, which
includes better meeting consumer needs, maximizing market opportunities and strengthening our overall
competitive positioning. Pricing decreases generally reduce margins, but are done in anticipation that they will
result in increased transaction volumes. In addition, failure to compete on service differentiation could significantly
affect our future growth potential and results of operations.
As noted above, many of our agents outside the United States are national post offices. These entities are usually
governmental organizations that may enjoy special privileges or protections that could allow them to simultaneously
develop their own money transfer businesses. International postal organizations could agree to establish a money
transfer network among themselves. Due to the size of these organizations and the number of locations they have,
any such network could represent significant competition to us. Because these entities are governmental
organizations, they may be able to—or be required to—offer their money transfer services to the public at,
near or below their cost of providing such services.
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