2. Forward-looking statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
Various statements contained in this document constitute “forward-looking statements” as that term is defined under the Private Securities
Litigation Reform Act of 1995. Words like “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expects,” “estimates,” “projects,” “positioned,”
“strategy,” and similar expressions identify these forward-looking statements, which involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated,
projected, forecasted, estimated or budgeted, whether expressed or implied, by these forward-looking statements. These factors, among others,
include: (1) the ability to compete with a range of other communications and content providers; (2) the ability to manage customer churn; (3) the
continued right to use the Virgin name and logo; (4) the ability to maintain and upgrade our networks in a cost-effective and timely manner; (5)
possible losses in revenues due to systems failures; (6) the ability to provide attractive programming at a reasonable cost; (7) the ability to
control unauthorized access to our network; (8) the effect of technological changes on our businesses; (9) the reliance on single-source
suppliers for some equipment, software and services and third party distributors of our mobile services; (10) the ability to achieve our business
plans; (11) the ability to fund debt service obligations through operating cash flow; (12) the ability to obtain additional financing in the future and
react to competitive and technological changes; (13) the ability to comply with restrictive covenants in our indebtedness agreements; (14) the
extent to which our future cash flow will be sufficient to cover our fixed charges; and (15) general economic conditions.
These and other factors are discussed in more detail under “Risk Factors” and elsewhere in Virgin Media’s Annual Report on Form 10-K for the
year ended December 31, 2007, as filed with the Securities and Exchange Commission, or SEC, on February 29, 2008, as amended, and Virgin
Media’s Quarterly Reports on Form 10-Q for the quarter ended March 31, 2008, as filed with the SEC on May 8, 2008, for the quarter ended
June 30, 2008, as filed with the SEC on August 7, 2008 and for the quarter ended September 30, 2008, as filed with the SEC on November 10,
2008. Virgin Media assumes no obligation to update forward looking statements to reflect actual results, changes in assumptions or changes in
factors affecting these statements.
1
4. Agenda
2:30 Neil Berkett: Strategy for Growth and Performance to Date
– Why Virgin Media is best positioned in a new converging digital world
3:15 Mark Schweitzer: Consumer Growth Initiatives
3:35 Q&A
3:55 Break
4:10 Howard Watson: Network Strength
– Technical and competitive advantages of our network now and in the future
Building a Customer Focused Organization
– Proposed operational transformation program
4:35 Q&A
4:50 Charles Gallagher: Financial Structure & Flexibility
– Non-consumer assets
– Financial implications of operational transformation
– Investing for growth
– Flexible capital structure
5:10 Neil Berkett: Regulatory Progress and Summary
5:20 Q&A
5.35 Close
3
5. Management
Neil Berkett
CEO
Howard Watson
Andrew Barron Mark Schweitzer Charles Gallagher
Chief Transformation
Chief Customer and Chief Commercial Senior Vice
& Technology Officer
Operations Officer Officer President Finance
Elisa Nardi Bryan H. Hall Malcolm Wall
Chief People Officer General Counsel CEO – Content
4
7. Align operating model with strategy
Building a customer focused organization able to respond
effectively to fast moving changes in the market,
technology and consumer demands
• Expect proposed new operating model will deliver significant improvements in
– Customer focus, product management/delivery, and clearer accountabilities
leading to streamlined decision-making
• Supported by better processes with a view to achieving annualized P&L
savings of over £120m by 2012
• Strategic growth initiatives mean capex expected to be at top end of 13-15%
guidance range
– Targeting 10Mb growth, intelligently expanding our network, strengthening
TV, DPI, behavioural advertising, leveraging mobile
6
8. The world is changing!
UK penetration of integrated PVRs, VOD
Forecast global consumer IP traffic 2005-2011
& HD services
Consumer IP traffic will quadruple in 4 years driven by video
TB/mo
8 Exabytes/mo Web 3.0 Video to STB & TV
PVR VOD HD
100%
Switch to HD delivery
IPTV 90%
Core to Casual MMOG
80%
DVD Digital Retail
Global consumer IP traffic
70%
Rise of Streaming
Multimedia enabled UGC
60%
Broadcasters go online
50%
40%
MMOG
30%
UGC sites e.g. YouTube
Social Networking
20%
SaaS – Salesforce.com
2 Exabytes/mo Web 2.0
10%
Broadband Adoption
Web 1.0 0%
eCommerce e.g. Amazon 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Web-based email
1970 1980 1990 2000 2005 2006 2007 2008 2009 2010 2011 Yahoo! & Google emerge
Netscape Browser
Source: Cisco, 2008 Source: 3reasons ltd, spring 2008
• Changing habits of consumption
• Overall traffic per user is growing rapidly across the world
• Consumer IP traffic will quadruple by 2011 driven by video – Cisco estimate (see graph)
– UK faces unique iPlayer issues
• Ofcom suggest 400% increase in VOD in next three years
• Virgin Media broadband customers’ average data consumption up 81% from 4.7 to 8.6Gbytes per month in 18 months
7
9. Application strength is key
• Levelling the linear content playing field versus Sky
– Possible regulatory intervention from Ofcom Market Investigation
– Economic wholesale access to premium
– Access to Premium HD
– Return of Sky Basics
– Largely funded through increase in VMtv licence payments
– Plan to add linear HD channels
• Content increasingly delivered quot;over the topquot;
– iPlayer online
– Studio movies/TV increasingly delivered over internet
– You Tube, Google Video, iTunes etc
• Consumers increasingly demanding On-Demand content
IP and TV world converging; Virgin Media best placed to exploit
8
10. Our priorities
Refocus growth strategy on leveraging our network advantage
Strategic
Strategic
Leverage mobile as the 3rd
Lead next generation Lead on-demand TV
broadband revolution screen in the home
No.1 priority reducing churn
Billing system migration
Improve product quality and reliability
Operational
Operational
Customer service
Address backbook
Develop analytical tools
to enhance understanding of the market and our customers
Addressing our capital structure
Financial
Financial Capture 0perational efficiencies
Regulatory Address imperfections in the Regulatory Framework
Regulatory
9
11. Cable has a clear technical advantage
Virgin Media BT
Network
Network
LLU
Hub Exchange
Copper to the Cabinet
Fiber to the Cabinet (POTS & ADSL2+)
Cabinet Cabinet
Coax to the Home
(DVB-C & DOCSIS 3)
Copper to the Home
(POTS & ADSL2+)
Copper to the Home
(POTS & VDSL2 capable)
2, 10, 20, 50 Mb/s >20 Mb/s to <5%
Home Home
Plus DTV & VOD Includes any IPTV
10
12. Delivering the 3rd Screen with TV,
Broadband and Mobile
Entertainment Communication and social networking
• Plan to launch ‘Free instant Windows Messenger’ for
• Mobile portal and Virgin TV programme collaborations
customers with compatible handsets
– Sarah Connor Chronicles, Most Haunted
• Instant Messenger expected to attract customers with
• Mobile Portal and TV Video On Demand collaborations – higher usage profiles
joint music campaigns e.g., Jack Johnson artist takeover • Mobile access to Virgin broadband e-mail addresses
simultaneously on both TV and Mobile platforms provides always-on mail, home or away
• New mobile portal launching Dec offering customer access
• Cross portal and sponsorship programmes – V Festival
to social networking on mobile – quick access to Facebook,
content, mobile gig list application, with live TV footage via
Channel My Space, Bebo, Yahoo!, new Yahoo! search engine
Web browsing Handsets and pricing
• • More 3G devices with larger touch screens to support
Currently use Motricity for platform / search
• internet / video use
Provides simple mobile access to popular mobile web sites,
e.g., BBC, e-Bay, Amazon • Simple, affordable pricing
• Redesigned mobile portal to promote games, music, TV
– Daily unlimited usage rate of 30p from early December
highlights,
• – Monthly data inclusive packages in 2009
Cross platform advertising delivered via 4 screens
11
13. We have the best broadband economics
Giving us a real competitive advantage
In-franchise share of revenue indexed to share of
Total & in-franchise share of broadband subscribers
subscribers
In-franchise market share National market share
48.7% 161
106
101 96
23.2%
22.2% 66
17.9%
11.2% 45
12.0%
11.3% 6.9%
10.8% 8.0%
6.5% 3.4%
Virgin BT Retail Sky Talk Talk Tiscali Orange Virgin BT Retail Sky Talk Talk Tiscali Orange
Media Media
• Our unique broadband proposition creates a
Average cost per subscriber relative to Virgin Media
uniquely profitable combination:
– High share, strong ARPU and leading cost
248
base
217
210
193
179
• DSL competitors face an unenviable choice
100
– Growing market share, but with low
revenues on a high cost base (Sky)
Virgin BT Retail Sky Talk Talk Tiscali Orange – Falling market share, with high revenues
Media
on a high cost base (BT Retail)
12
Source: Oliver & Ohlbaum Analysis, October 2008; Costs weighted for LLU / Non LLU split
14. Strategic growth objectives
Consumer strategy YTD progress
• 4Mb to 10Mb upgrade completed in Sept 08
• Supported wireless router launched
Lead next
Lead next • Migrating 20Mb customers onto Docsis 3.0 will improve service quality and
generation broadband
generation broadband speed for all tiers
• Preparing for 50Mb launch (Q4)
• First and only TV platform to launch iPlayer
Lead on demand TV • Approx 12m iPlayer views per month, 1/3 of all iPlayer views
Lead on demand TV
•
revolution 96% growth in VOD views from Q3-07 to Q3-08
revolution
• Increased DVR (V+) penetration from 6% to 14% year-on-year
• Record contract cross-sell to cable base in Q3-08
Leverage position in • Renegotiated wholesale voice and data rates with T-mobile
Leverage position in
•
mobile Launched mobile broadband in October
mobile
• Mobile sales integration
13
15. Customers are paying for quality
On-net broadband tier mix (‘000s / % of total) Tier mix at point of acquisition
quot;Mquot; 2Mb quot;Lquot; 10Mb quot;XLquot; 20Mb
quot;Mquot; 2Mb quot;Lquot; 10Mb quot;XLquot; 20Mb
3,308 3,626
4%
6% 10% 12% Average ARPU uplift
19%
18%
19% – L to XL + £8
35%
– M to L + £3
76% 77%
71%
53%
Q3-07 Q3-08 Q3-07 Q3-08
• Huge success in driving upsell to higher speed, higher priced broadband at point of sale
• Upsell is central to our broadband strategy, given high market penetration but low penetration of high speed
– Higher ARPU
– Lower churn
– Increased differentiation versus competition
14
16. The on-demand world is here
VOD views per user iPlayer/BBC views (m)
Monthly VOD views (m)
45 27
11.9
9.1
17
23
Q2-08 Q3-08
Q3-07 Q3-08 Q3-07 Q3-08
• VOD usage is continuing to grow – nearly half of our TV homes use this service monthly
– Catch-up TV, music and TV on demand are the most viewed products
• VOD reduces churn
• Leverage growing usage through VOD advertising capability
– 3 month trial underway in North London
– Adverts from Kellogs, John Lewis and Royal Mail are being inserted around selected on-demand
programs from VMtv, Channel 4 and Warner TV
• Opportunity to further improve user interface through personalisation, search, visuals,
recommendations etc.
15
19. Financial improvement since merger
SG&A (£m) OCF margin³ %
33.9% 33.6%
267 267
32.8%
258 32.4%
245 31.7%
238 31.0%
230 30.6%
223 29.9%
217
211
28.9%
Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08
Net debt4 (£m)
OCF¹ less Capex² (£m)
225 5,905
218
209
204 5,816
199 5,794
5,741 5,736 5,732
184 182
5,677
5,637
5,597
155 153
Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08
1 OCF is operating income before depreciation, amortization, goodwill impairment and restructuring and other charges and is a non-GAAP financial measure
2 Capex is purchase of fixed assets and purchase of intangible assets
3 OCF margin is OCF divided by revenue
18
4 Net debt is a non-GAAP financial measure; See appendices for reconciliations of non-GAAP financial measures to their nearest GAAP equivalents
20. Growth and value drivers
Volume ARPU Tenure / Churn
• Broadband penetration • Reduce backbook premium • Fault reduction
whilst protecting ARPU and
• Product differentiation • Product depth / quality
margin
(50Mb BB, V+, VOD, mobile) (50Mbs BB, V+, VOD, mobile)
• Driving up-sell and cross-sell
• Sales and marketing efficiency • VFM enhancements via
• Improving depth and range cross-sell / up-sell to reduce
– Segmentation
of products backbook premium
– Channel strategy
• Price rises • Becoming more customer
– Maximizing customer centric and improving Net
• Manage telco usage decline
touchpoints Promoter Score (NPS)
• Building on Virgin brand
• Bundling drives RGU/customer
• Intelligently expanding our
footprint
Embedded key customer value metrics across the organization
19
21. Influences on revenue and ARPU
Telephony usage Potential market
Backbook decline pressure
Revenue and ARPU
New customers
Upsell Cross-sell Price rises
Upsell, cross-sell and new customer growth underpinned by superior broadband,
VOD in TV and contract mobile
20
22. Backbook unwind slowing
Mitigated by up-sell/cross-sell
Breakdown of quarterly rate of migration from Back to
% Customers on backbook pricing
Front Book pricing (%)
100% Price migrate to Frontbook
Reduced by success of up-sell/cross-sell offers
90% Q2-07 backbook unwind estimate
Up-sell to Frontbook
80%
up-sell offers used to migrate customers
70%
Cross-sell to Frontbook
60% Cross-sell offers used to migrate
customers; improved profitability of
offers in 2008
50%
40%
30%
20%
Q3-08 backbook unwind estimate
10%
0%
Apr-07
Jun-07
Aug-07
Apr-08
Jun-08
Aug-08
Apr-09
Jun-09
Aug-09
Feb-07
Oct-07
Dec-07
Feb-08
Oct-08
Dec-08
Feb-09
Oct-09
Dec-09
2007 2008 2009
21
23. Sources for sustained revenue growth
Next generation broadband subs (10Mb or more) Contract mobile subs
4.0m
1.6m
0.6m
1.05m
Q3-08 Q4-12 Q3-08 Q4-12
Average monthly VOD views
100m
45m
Q3-08 Q4-12
22
24. Intelligently expanding our cable
footprint
Significant low cost New Build opportunity
• New homes can be cabled for £200 or less per home
• Could add 40-50k per annum when house build market returns
• Strong take up in New Build areas with average penetration reaching 40% within 6 months
• 5 year payback and significant ongoing value generation
– through up-sell and cross-sell
• Developing relationships with national and regional developers to pitch Virgin Media’s
vision and negotiate favourable commercial agreements
• Opportunities of near-net infill and analogue overbuild also being investigated
• Accommodated within existing capex budget
New build program scales up on success basis
23
25. National household opportunity
Non-cable coverage split between LLU and Non-LLU
Opportunity to expand
our cable footprint
All UK - 5,500 exchanges
• C&W wholesale deal
(25.8 m homes)
gives us better cost
structure
• Enhanced products and
improved pricing
• Billing systems migration
Wholesale LLU (C&W) now completed
Cable on-net network 11m HH of which 4.3m
homes incremental
12m marketable homes
to on-net • BT and BT Wholesale
products are only
competition to Virgin
Media
• WLR and NLA cut out
BT relationship
BT Wholesale Network
• We are the only major provider who can bundle with mobile
• Better opportunity to capture cable “movers”
• We currently have low off-net penetration (<3%), meaning we can be more aggressive for growth
24
26. Reasons customers will choose Virgin
Can watch what I Great value
want when I want bundles
with 000’s of hours customized for my
Fastest and most
Customer friendly
of VOD needs
reliable broadband
Makes the digital
iPlayer on my TV!
world simple
Then only place I
Great value mobile can get mobile,
My favourite
with my cable landline, TV and
content across all
services broadband in one
Simple single bill
3 screens - TV, PC great package
and mobile
25
29. The consumer broadband market
today
• Continued growth in overall broadband market (though slowing)
• Continued pricing pressure at low end; pricing and cost pressures likely to drive consolidation over time
• Cable to retain and deepen differentiation at the top end
– Virgin Media & Sky the only major players basing tiers on speed; others differentiate by usage caps
– Our unlimited fibre optic proposition will remain unique for foreseeable future
Consumer broadband market (000s) Consumer broadband market share
Other
Virgin Media BT
7%
Carphone Warehouse Tiscali Orange Virgin Media
Sky Orange 7% 23%
Other DSL & LLU
16,000
14,000
Sky
12,000
11%
10,000
8,000
Tiscali
6,000
12% BT
4,000
22%
2,000
Carphone
0
18%
Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2-
06 06 06 06 07 07 07 07 08 08
Source: Company reports and Virgin Media research Source: Company reports and Virgin Media research
28
30. Opportunity and strategic initiatives in
broadband
Characteristics Our positioning Opportunity
• •
Growth driven by price & Lowest unit cost operator
bundles
Low tier broadband
• •
Significant up-sell 10Mb cable offering superior
opportunity to 16Mb DSL (latter reaches
Mid tier broadband
only 10% of UK homes)
• •
Speed & quality important Sustainable competitive
• Application driven advantage vs. ADSL
High tier broadband
• Our 2, 10, 20, 50Mb tier structure drives upsell and better value acquisitions
– increasing share of broadband profit pool
• 50Mb drives upsell and wider appreciation of our ultra-fast broadband capability
• 2009 will focus on 10Mb, using Docsis 3.0 to dramatically reinforce our QoS and speed leadership
• Will launch a market-leading package of Value Added Services
• Plus ground-breaking new services, enabled by increased network intelligence
• Relaunch of virginmedia.com, enhancing quality of offering & customer experience
29
31. Leading in broadband speed delivery
Virgin Media continue to lead the market in broadband speed delivery, leading the
ADSL ISP’s in a number of key benchmarking studies throughout 2008
Virgin Media now tops the latest Point Topic research in the ratio of advertised speed to reported speeds
above 2Mb, leading Tiscali, Sky, BT, Car Phone Warehouse and Orange (Jan – July 2008)
Virgin Media have now comprehensively taken the crown for the Fastest broadband provider away from O2
who have held the position all year (Sept 2008)
With an average reliability of 50.5%, cable broadband continues to be far more reliable than ADSL as a
whole – which scored an average of only 38.8%. Broadband Choices also reported our 2Mb service
delivering 81.5% of headline speed, far superior to any ADSL providers 2Mb service (Aug 2008)
Virgin Media 20Mb average throughput is 3 times faster than the top speeds offered by BT, AOL, Tiscali,
Talk Talk and Pipex (Sept 2008)
Top 10 Broadband 2008 Awards: Virgin Media won the title of Best Broadband Bundle – “The award for
best broadband bundle went to Virgin Media whose range of fast, unlimited, cost-effective bundles stood
out from the crowd” (2008)
Recently the BACC, the body responsible for the clearance of TV adverts prior to transmission, have
cleared our 50Mb launch advertising which claims our 50Mb product is the ‘Fastest’ Broadband available in
the UK. This is a first time ever that the body has approved a ‘superlative’ speed claim for an ISP and
reinforces our dominant speed positioning in the UK market (Oct 2008)
30
32. Launch of 50Mb: the next generation
of UK broadband
• The best, fastest broadband product – by a mile! A tripling of Virgin Media’s cable network capacity
– Unbeatable speeds
– Broadband with robust VAS package DOCSIS 1.0 network DOCSIS 3.0 network
– Packaged with wireless kit 3.7 m customers Next Generation
in 2008
• 50Mb will be priced to drive premium user demand
– Targeted at power users & ‘premium purchasers’
– A compelling upsell price point
38 38 50 50 50 50
– Currently in final trials, launch late Q4 Mbit/s Mbit/s Mbit/s Mbit/s Mbit/s Mbit/s
• DOCSIS 3.0 a huge ‘halo’ for all customers
– DOCSIS 3.0 the largest UK network build since the
original launch of the cable network
– 4 new D/s channels on top of today’s 2 D/s
– The new home for our 10-20-50 customers
Each D1 modem can Each D3 modem can view
– Statistical gain of channel bonding deliver massive
view one D/s channel all 4 D/s channel.
speed capability Theoretical capacity
200 Mbit/s
– Dramatic reductions in cost of capacity
31
33. Lead on Demand Television
Revolution
Goal: 100m VOD views per month by
end of 2012
34. The TV market today
• Growing share for “multi-channel” viewing driven by free-to-air DTT (Freeview)
• VOD is still a relatively new development, but iPlayer is driving growing usage
• Sky keeping churn low through Sky+ and other incremental services
• BT recently entered market with BT Vision (TV over ADSL)
Digital TV market growth (000s) Digital TV market share at Q2-08
Sky Freeview Virgin Media
Free Sat
Free Sat TV over ADSL 4%
25,000
Virgin Media
15%
20,000
Freeview
15,000 43%
10,000
5,000
Sky
0
38%
Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2-
06 06 06 06 07 07 07 07 08 08
Source: Company reports and Virgin Media research Source: Company reports and Virgin Media research
33
35. Opportunity and strategic initiatives in
TV
Characteristics Today’s positioning Opportunity
• •
Low growth Poor content economics
Premium TV Limited
• •
Heavy investment Sky owns c.80% market
• •
Decent growth VOD to all
Basic pay-TV
• •
Choice / price driven Setanta in XL TV tier
• •
Many subs dissatisfied “Free TV + VOD” bundled
Free DTV
and want more choice with other products
• Creating linear parity following the return of Sky basics
• Exploit our VOD superiority
• Grow penetration of our best-in-class DVR service
• Build our HD offering
• Enhance the TV interface
• Regulatory progress on premium offers significant opportunity
– Today less than 20% TV subs take premium at negative margin
34
36. VOD content
Virgin Media offers over 4,600 hours of on-demand content
Cost
• Huge selection of shows from the last 7 days from: BBC, 4oD, LIVING, Bravo, Virgin1 Free
Catch Up
• Includes 350 hours from BBC iPlayer
TV
• ITV and Channel 5 are the only terrestrial channels missing on catch-up
• Over 2,000 comedy, drama, entertainment, factual, kids and sci-fi shows M&L–
•
TV Choice 80 hours HD content £7/month
XL – Free
• Over 2,000 music videos M&L–
•
Music Karaoke, playlists and concerts 20p/video
• Adds a live music component XL – Free
• Over 500 films – blockbusters, cult classics, family favourites Pay Per
•
Movies 30 HD movies View:
£1.50-£4.50
• Current TV, Teachers TV, Real Estate TV, Baby Channel, New You Free
More Free
TV (Niche)
• Bollywood movies: from £2 per view Various
More On
• Adult on demand: £5 per view; £6 HD per view
Demand
• Late night 24/7: 18 rated but not “Adult” rated, from £2.49
More to follow: catch-up, live music, enhance SVOD with premium TV content and expand HD VOD 35
38. Growing V+ penetration and
enhancing HD
PVR penetration in Sky and cable digital TV homes • Significant DVR growth opportunity with
(as at 30 Sept 08)
only 14% V+ penetration
46%
• Our V+ box superior to current Sky+ box
– 3 tuners, 160GB storage, HD capable
• V+ customer churn is 57% lower than non
V+ TV customer churn
• Plans to enhance HD content
14%
– Will add HD broadcast channels
– Continue to grow on-demand HD
content
Sky Virgin Media
37
40. Defending the cash cow
UK residential market call volumes (billions of minutes)
On-net telephone net adds (000s)
and year-on-year decline (%)
39
32 22%
29.8 29
30 20%
17.8%
26.8
28 18% 15
26.3
15.3% 25.1 25.1 6
26 16%
15.6% 15.4%
24 14%
14.4%
(1)
22 12%
Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08
Source: OFCOM Telecommunications Report, Oct 2008
On-net telephone customers by type (millions)
• UK residential market call volumes declined 15% y-o-y
in Q1-08 Metered Unmetered
2.10 2.10
• Mitigate impact of usage declines through: 2.07
2.04
2.02
– Continued focus on migration to flat rate
2.04
– Bundling fixed line with broadband and TV
1.99
1.99 1.98
– Mobile cross-sell and bundling initiatives e.g.
bundle landline / mobile minutes
1.89
– Potential for line rental price increase
– Continued innovation e.g. Talk Anywhere Q3-07 Q4-07 Q1-08 Q2-08 Q3-08
39
41. Key strategic initiatives in mobile
Contract mobile customers (000s) Lower mobile churn by VMED cable customers
579
436 VMED
82.4%
329 customers
246
121
Non-VMED
56.4%
customers
Q3-06 Q1-07 Q3-07 Q1-08 Q3-08
Mobile subscribers retained at 12 months
• Fully integrate Cable / Mobile
• Drive higher contract penetration more aggressively into Cable base
• Exploit new T-Mobile wholesale rates to grow mobile data usage to handset
• Mobile broadband – opportunity to bundle with fixed broadband
• Mobile TV / Video is a growth opportunity, leveraging our existing TV platform
• Cross-sell and bundle with offnet more aggressively
40
43. Developed customer insight tools which
help us understand the market…
Household
Usage
Gives us a comprehensive picture of a total
household’s use of communication services,
Gives us a clear and detailed
allowing us to segment the entire UK market to
picture of how our customers use
identify “must succeed with” segments and
our services and provides valuable
help us understand how to win in these spaces
insights into household and
subscriber lifestyle
Value
Ensures we understand the
differences between our highest Subscriber
and lowest value customers and
Gives us a comprehensive picture of the
are able to utilise this information
consumer and segment the UK market to help
operationally
us understand the mapping between
household and individual needs
42
44. Our customer segment strategy
Aspiring Thriving Realigning
Young Young New Growing Teenage Nearly Older Older Empty
1 Greys
Utilise our quad play product Single Couple Family Family Family There Single Couple Nesters
Actively superiority, brand image and service
1
Doing Well
reliability to dominate the Thriving 2 2
orient our Family Market Doing OK
services to
the highest Making Do
2 Exploit the natural “halo effect” from
2
value part of Single
our new focus to drive significant Parents
the market growth in the shoulder segments –
Surviving, Aspiring, Realigning
Surviving Retiring
Emerging Nesting
Rather than leading on speed for the launch of 50Mb Broadband, position as the
Utilise a variety of
only broadband services that will support fast simultaneous usage for multiple
levers to implement family members
the strategy
Provide clear reassurance on product reliability through guarantees, meeting
Ensure
customer care concerns through clear communication of service levels
we
Marketing
address
Communicate parental control levels available and clear instructions on how to
the needs apply
Proposition of our
“bulls eye” Provide integrated mobile and landline propositions which give clear benefits for
having family members on Virgin Mobile network (free calls to landline, reduced
segment
Commercial calls between family members etc)
Utilise understanding of different TV preferences across family to produce family TV
channel pack (Sport for Dad, Celebrity / Soaps for Mum / Cult USA viewing and films
Operations
for teens / CBeebies etc for children)
43
47. Network Strength
• Video usage is now driving network bandwidth . . . all
usage trends are up
• Hybrid Fibre Coax remains extremely well placed to serve
this demand
• UK market has unique characteristics which favour cable
46
48. Our network advantage 2008
Virgin Media BT
Network
Network LLU
Hub Exchange
Copper to the Cabinet
Fibre to the Cabinet (POTS & ADSL2+)
Cabinet Cabinet
Coax to the Home
(DVB-C & DOCSIS 3)
Copper to the Home
Copper to the Home
(POTS & ADSL2+)
(POTS & VDSL2 capable)
2, 10, 20, 50 Mb/s >20 Mb/s to <5%
Home Home
Plus DTV & VOD Includes any IPTV
47
49. Our network advantage 2012
Virgin Media BT
Network
Network LLU ?
Hub Exchange
Fibre to the Cabinet Fibre to the Cabinet
Cabinet Cabinet
Coax to the Home
(DVB-C & DOCSIS 3)
Copper to the Home
Copper to the Home
(POTS & VDSL2)
(POTS & VDSL2 capable)
Capable of 200 Mb/s Max Speed 40Mb/s
Home Home
Plus DTV & VOD Includes any IPTV
48
50. Our spectrum advantage
BT VDSL2 Copper spectrum used for VDSL2 is 12 or 30MHz
Copper Spectrum
Virgin Media
Coax spectrum is a min of 650MHz with c80% at >750MHz
Coax Spectrum
Broadband will Analog TV Digital TV VOD
use up to 48MHz approx 240MHz approx 216MHz approx 72MHz
after DOCSIS 3 will be freed up used By DVB-C used by DVB-C
rollout completed with switch off for linear TV for on-demand
Spectrum freed up from ATV provides plenty of scope for further
growth in Broadband, Linear DTV (SD & HD) and VOD
49
51. A superior quality of experience
You don’t lose If you want to
Broadband speed watch iPlayer on
when you watch your TV in full TV
on-demand TV quality – you can
+ +
Broadband Digital TV VOD
The independent spectrum allocations for Broadband, DTV and VOD mean
that each one can be engineered to deliver the right simultaneous QoE 50
52. Expansion into mobile broadband
Virgin Media
Communication & Entertainment
Virgin Mobile
Virgin Media
MVNO
Network
DTV & VOD Mobile
Mobile
Broadband Voice & TXT
Telephony Broadband
The UK’s leading Communication
& Entertainment network 51
53. Looking into the future …
Existing
Existing
Linear & On-Demand TV
Ultra-fast Broadband
(DVB-C)
(DOCSIS 3.0)
Home
Home
Gateway
IP Home Network
PC or ipSTB Portable
Laptop TV Device
Bring both halves of our powerful access network together
into an integrated next generation entertainment experience
52
54. …next generation entertainment
Broadcasters & Advertisers
will be able to create an
entertainment experience
which can move effortlessly
between all of their TV assets
and all of their web assets
Its not about putting the
Internet on your TV nor about
putting the TV on your PC.
Its about enabling broadcasters
to create the next generation of
entertainment for whenever and
wherever you want to enjoy it53
56. 2008 – 2012 operational
transformation review
• To create a new operating model for our organisation which delivers significant improvements in:
– Customer focus
– Product delivery and management
Our vision
Our vision
– Clearer accountabilities leading to streamlined decision making
• Supported by better processes, making considerable savings
Proposed key initiatives
• Refocus organization on product delivery
• Invest in holistic approach to sales channels supported by “customer insight”
• Converge mobile and cable marketing
Customer growth
Customer growth
• Drive efficiencies across operations
• Further cable and mobile operational integration
• Call volume reduction through removal of root cause quality issues
• Focus on first call resolution
Customer service
Customer service • Improve resource management – work scheduling and despatch
• Supply chain transformation
• Transformation of IT support
• Rationalization of property portfolio
Support functions
Support functions
• Review support functions: Transaction services
Total annual P&L savings by 2012 >£120m
Goals
Goals
Net reduction in roles in the organization by 2012 2,200
55
57. 2008 – 2012 operational transformation:
Proposed new operating model
Customer
Provide Platform
Operations
Customer Contract Management
Research and Consumer Insight
Sales & Marketing
TV / On Demand
Broadband
Telephony
Develop Proposition
Integrated Product
Work
Strategy
Install &
development
Management
Shared Services
Repair
Product
and
Operations Delivery
Product Proposition
Connection
Scheduling & Pricing
Product Planning &
Implementation
Operations Delivery
Network Planning
Network
Monitoring and
Fault
Provision & Maintain Core Network
Management
Operations Support
Programme People & Org Procurement &
IT CTO Facilities Finance Legal
office Development Supplier Mgt
56
58. Strategic objectives for growth
• Guides our people and
customer experiences
Brand is front
• Drives our cultural
and centre
development
Build growth
Manage our
plans around
business more
segment
effectively
strategies
• Insight and knowledge led
• Integrated planning and performance
Excite and delight people with
management • Based around customers needs
our easy to use, irresistible and wants from acquisition through
the full customer journey
customer propositions that
drive profitable growth
End to end P&L
Execute
and Product
brilliantly
Management
• Manage product P&Ls
• Multi-skilled growth contact centres
• Drive strategy, innovation, delivery
• Integrated customer journey and interface
Strengthen our and customer experience
with Care
delivery • Clear accountability
• Multi-channel distribution
capability
• Invest in Online experience • Faster deployment of
products and services 57
59. 2008 – 2012 operational transformation
review: Customer growth
• Focus on high value channels: invest in on-line channel
• Maximize demand through multi-distribution approach
Optimize sales channel
Optimize sales channel • Segment intelligence based approach to reduce subscriber acquisition costs
• Maximize complimentary channel approaches (e.g. Telesales scheduling lead closing visit)
• Operate multi-skilled, in-house call centres
• Review possible off shoring high volume, low complexity enquiries
Call centres
Call centres
• Maximize revenue at each customer touchpoint
• Leverage brand: Deliver Virgin customer experience at all customer touchpoints
• Focused, integrated approach across all products: Media and Mobile
Marketing
Marketing
efficiency • Optimize marketing spend change to reflect awareness and consideration gains and focus
efficiency
on high value segments
• Combined reward structures
• More integrated channel approach to selling e.g. field selling mobile with targets embedded
Cable and mobile
Cable and mobile in commission plans
integration
integration
• Increased bundling and maximize upsell through segmentation and contact strategy work
• Use Cable Broadband leadership to deliver complementary Mobile Broadband growth
58
60. Strategic objectives for Customer
Service
Customer touch points:
Take control of • Call centres
our customer • Install and service
experience • Network
Reduce costs
Improve product
through better
reliability
processes and
systems
• Supply Chain • Reduce defect rate
Enable growth through
• Customer self service • Equip staff
providing a service to our
• Consolidation
customers that is always on
• Automate
and being unbelievably easy
• Service levels
to do business with
Understand
Manage change
segment and
brilliantly
customer value
• Differentiate service:
• Multi-skilling
• Higher value customers
• Product introduction
Get things right • Complexity of customer contact
• Invest in Online experience
• Customer education
first time
• Review our suppliers
• Staff multi-skilling 59
61. Customer Service
Proposed operating model vision
Self Care
Serve:
in house in house
outsource Offshore onshore In
multi- 1st
service house
Will work closely with
install line
skilled
INDICATIVE MIX Tiered Customer
Product to agree and
Care delivering
in house ensure delivery of target 2nd
In 95% first contact
Offshore onshore
line
multi-skilled house
NPS set by Proposition team resolution
Network / Business
5% case
in house management
Work closely with Sales
Data specialists
and Marketing to
Multi-skilled engineering teams
cross sell and up sell
Delivering end to end service
to customers in geographic units
Activate &
Single Service and fault management Operate
Field Resource & Supply Chain function responsible for network
Network
Management management and outage screening to
improve network responsiveness
Forecast Despatch
Schedule Planning and Provisioning
Demand
Single end to end planning
and provisioning Build
Plan Design
responsibility
Resource planning and despatch services
across regional field organisation
Working closely with Technology to drive down obsolescence and continuously improve performance 60
62. 2008 – 2012 operational transformation
review: Customer Service
• Call reduction through simplification of billing and pricing
• Improve 1st call resolution through investment in product reliability
Reduce call volume
Reduce call volume • Provide and promote self service on-line
• Redefine install process and reduce defects
• Integrate activities through multi-skilling first line agents
Improve inbound call
Improve inbound call • Differentiate high value, high complexity calls
experience
experience • Review outsourcing and off-shoring of lower value, lower complexity calls
• Schedule and support teams to provide improved customer appointment times
• Fewer hand-offs as schedule and support team own customer contact once job is
Improve resource
Improve resource scheduled to field
management
management • Field delivery – take control of customer activity
and field delivery
and field delivery
• “Perfect visit” initiative to improve efficiencies and customer experience
• “Premium install” initiatives to differentiate service to higher value customers
• Consider consolidation of warehouses
• Improved control of CPE and recovery of assets
Supply chain
Supply chain
transformation • Review efficiency of suppliers and purchasing
transformation
• Improve planning process to update inventory systems with network asset data
Planning & network
Planning & network
• Integrate outage surveillance to improve network responsiveness to customer impacting
management
management
faults 61
63. 2008 – 2012 operational transformation
review: Support functions
• Reduced volume through improved prioritization and efficiency
• Consider transformational outsourcing of tech services
Transform IT support
Transform IT support
• Review duplication of functions e.g. local tech teams, program mgt
and technical delivery
and technical delivery
• Improved permanent: contract staff ratio
• Consider consolidation of multiple sites
• Property strategy developed alongside growth and customer operations plans to maximise
Rationalize property benefit
Rationalize property
portfolio
portfolio • Consider home-working solutions with meeting facilities at local sites where possible
• Increase quality and utilization of biggest regional offices
• Review of support functions: Finance, HR, Corporate Function
• Introduce new integrated shared services function
Review support
Review support
• Consider outsourcing certain transaction services
functions
functions
• Create a single employee service group
62