Virgin Media 10Q 2009 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q


ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-50886

VIRGIN MEDIA INC.
(Exact name of registrant as specified in its charter)

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
(Additional Registrant)


Delaware (State or other jurisdiction of incorporation or organization)		59-3778247 (I.R.S. Employer Identification No.)
909 Third Avenue, Suite 2863 New York, New York (Address of principal executive offices)		10022 (Zip Code)

(212) 906-8440
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filerý		Accelerated filero		Non-accelerated filero (Do not check if a smaller reporting company)		Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of October 28, 2009, there were 329,163,235 shares of the registrant's common stock, par value $0.01 per share, issued and outstanding, excluding 1,280,000 unvested shares of restricted stock held in escrow.

The Additional Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format. See "Note Concerning Virgin Media Investment Holdings Limited" in this Form 10-Q.

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VIRGIN MEDIA INC.

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2009

INDEX

		Page

PART I—FINANCIAL INFORMATION		5
Item 1. Financial Statements		5
Virgin Media Inc		5
	Condensed Consolidated Balance Sheets—September 30, 2009 and December 31, 2008	5
	Condensed Consolidated Statements of Operations—Three and Nine Months ended September 30, 2009 and 2008	6
	Condensed Consolidated Statements of Cash Flows—Nine Months ended September 30, 2009 and 2008	7
	Notes to Condensed Consolidated Financial Statements	8
Virgin Media Investment Holdings Limited		35
	Condensed Consolidated Balance Sheets—September 30, 2009 and December 31, 2008	35
	Condensed Consolidated Statements of Operations—Three and Nine Months ended September 30, 2009 and 2008	36
	Condensed Consolidated Statements of Cash Flows—Nine Months ended September 30, 2009 and 2008	37
	Notes to Condensed Consolidated Financial Statements	38
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		55
Item 3. Quantitative and Qualitative Disclosures about Market Risk		77
Item 4. Controls and Procedures		78
PART II—OTHER INFORMATION		80
Item 1. Legal Proceedings		80
Item 1A. Risk Factors		80
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		81
Item 3. Defaults Upon Senior Securities		81
Item 4. Submission of Matters to a Vote of Security Holders		81
Item 5. Other Information		81
Item 6. Exhibits		82
SIGNATURES		84

In this quarterly report on Form 10-Q, unless we have indicated otherwise, or the context otherwise requires, references to "Virgin Media," "the Company," "we," "us," "our" and similar terms refer to the consolidated business of Virgin Media Inc. and its subsidiaries (including Virgin Media Investment Holdings Limited, or VMIH, and its subsidiaries, and Virgin Mobile Holdings (UK) Limited, or Virgin Mobile, and its subsidiaries).

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"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," "expect," "estimate," "project," "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:

•: the ability to compete with a range of other communications and content providers;
•: the ability to manage customer churn;
•: the ability to maintain and upgrade our networks in a cost-effective and timely manner;
•: the ability to implement our restructuring plan successfully and realize the anticipated benefits;
•: the general deterioration in economic conditions;
•: the continued right to use the Virgin name and logo;
•: possible losses in revenues due to systems failures;
•: the ability to provide attractive programming at a reasonable cost;
•: the ability to control unauthorized access to our network;
•: the effect of technological changes on our businesses;
•: the reliance on single-source suppliers for some equipment, software and services and third party distributors of our mobile services;
•: currency and interest rate fluctuations;
•: the ability to fund debt service obligations through operating cash flow and refinance our debt obligations;
•: the ability to obtain additional financing in the future;
•: the ability to comply with restrictive covenants in our indebtedness agreements; and
•: the extent to which our future cash flow will be sufficient to cover our fixed charges.

These and other factors are discussed in more detail herein under "Risk Factors" and in our annual report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission, or SEC, on February 26, 2009, and revised by the current report on Form 8-K as filed with the SEC on May 27, 2009, which we collectively refer to as the 2008 Annual Report. We assume no obligation to update our forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.

Note Concerning Virgin Media Investment Holdings Limited

This quarterly report on Form 10-Q (excepting separate financial statements responsive to Part I, Item 1) covers both Virgin Media and VMIH, a company incorporated in England and Wales with its registered office at 160 Great Portland Street, London W1W 5QA, United Kingdom, which is a wholly owned subsidiary of Virgin Media Finance PLC and a wholly owned indirect subsidiary of Virgin Media Inc. VMIH is not an accelerated filer. VMIH is one of the guarantors of Virgin Media Finance PLC's 9.75% sterling senior notes due 2014, 8.75% euro senior notes due 2014, 8.75% U.S.

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dollar senior notes due 2014, 9.125% U.S. dollar senior notes due 2016, 9.50% U.S. dollar senior notes due 2016 and 9.50% euro senior notes due 2016. VMIH's guarantee of those notes is not deemed to be unconditional.

VMIH carries on the same business as Virgin Media, and is the principal borrower under Virgin Media's senior credit facility.

Note Concerning the 2008 Annual Report

On May 27, 2009, Virgin Media Inc. and VMIH filed a current report on Form 8-K with the SEC revising the historical financial and other information included in its annual report on Form 10-K for the year ended December 31, 2008 to: (i) reclassify its sit-up reporting unit as assets and liabilities held for sale and discontinued operations, (ii) report segment results based on a new operating segment structure and (iii) reflect the retroactive application of new accounting guidance issued by the Financial Accounting Standards Board, or FASB, at Accounting Standards Codification, or ASC, 470-20, or ASC 470-20, which requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer's nonconvertible debt borrowing rate.

The current report on Form 8-K retrospectively revised the following items of the annual report on Form 10-K for the year ended December 31, 2008, by replacing those items with the corresponding revised items contained in Exhibit 99.1 thereto:

•: Item 1. Business;
•: Item 6. Selected Financial Data;
•: Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations;
•: Item 8. Financial Statements and Supplementary Data;
•: Item 15. Exhibits and Financial Statement Schedules: (a)(1) Financial Statements and (a)(2) Financial Statement Schedules; and
•: Exhibit 12.1. Computation of Ratio of Earnings to Fixed Charges.

No items of the annual report on Form 10-K for the year ended December 31, 2008 other than those identified above were revised by the filing.

Note Concerning Financial Information and Currency of Financial Statements

All of the financial statements included in this quarterly report have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The reporting currency of our consolidated financial statements is U.K. pounds sterling.

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VIRGIN MEDIA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

			September 30, 2009			December 31, 2008

			(unaudited)
Assets
Current assets
	Cash and cash equivalents		£	351.6		£	181.6
	Restricted cash			6.0			6.1
	Accounts receivable—trade, less allowances for doubtful accounts of £13.0 (2009) and £16.5 (2008)			417.5			454.3
	Inventory			97.5			81.1
	Derivative financial instruments			0.3			168.4
	Prepaid expenses and other current assets			115.8			107.8
	Current assets held for sale			—			56.2

		Total current assets		988.7			1,055.5
Fixed assets, net				5,098.8			5,342.1
Goodwill and other indefinite-lived assets				2,082.3			2,082.3
Intangible assets, net				327.2			510.3
Equity investments				355.3			353.5
Derivative financial instruments				266.7			435.7
Other assets, net of accumulated amortization of £120.4 (2009) and £79.1 (2008)				152.1			153.9

Total assets			£	9,271.1		£	9,933.3

Liabilities and shareholders' equity
Current liabilities
	Accounts payable		£	307.2		£	370.5
	Accrued expenses and other current liabilities			424.7			449.9
	Derivative financial instruments			29.6			84.4
	VAT and employee taxes payable			63.7			63.5
	Restructuring liabilities			62.6			71.0
	Interest payable			155.7			131.6
	Deferred revenue			290.7			268.0
	Current portion of long term debt			42.2			40.5
	Current liabilities held for sale			—			36.2

		Total current liabilities		1,376.4			1,515.6
Long term debt, net of current portion				5,929.8			6,129.6
Derivative financial instruments				69.0			42.6
Deferred revenue and other long term liabilities				152.2			150.1
Deferred income taxes				82.8			79.2

Total liabilities				7,610.2			7,917.1

Commitments and contingent liabilities
Shareholders' equity
Common stock—$0.01 par value; authorized 1,000.0 (2009 and 2008) shares; issued 330.4 (2009) and 329.0 (2008) and outstanding 329.1 (2009) and 328.1 (2008) shares				1.8			1.8
	Additional paid-in capital			4,474.0			4,461.3
	Accumulated other comprehensive income			98.7			178.2
	Accumulated deficit			(2,913.6	)		(2,625.1	)

		Total shareholders' equity		1,660.9			2,016.2

Total liabilities and shareholders' equity			£	9,271.1		£	9,933.3

See accompanying notes.

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VIRGIN MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited) (in millions, except per share data)

			Three months ended September 30,						Nine months ended September 30,

			2009			2008			2009			2008
						(Adjusted)						(Adjusted)
Revenue			£	953.4		£	940.9		£	2,824.9		£	2,828.3
Costs and expenses
	Operating costs (exclusive of depreciation shown separately below)			403.8			398.5			1,222.1			1,215.5
	Selling, general and administrative expenses			201.2			216.1			608.3			628.7
	Restructuring and other charges			1.6			—			30.6			2.9
	Depreciation			235.6			213.7			702.2			674.2
	Amortization			61.0			63.3			183.3			221.7
	Goodwill impairment			—			(4.0	)		—			362.2

				903.2			887.6			2,746.5			3,105.2

Operating income (loss)				50.2			53.3			78.4			(276.9	)
Other income (expense)
	Interest income and other, net			1.3			7.8			6.6			20.9
	Interest expense			(119.9	)		(124.6	)		(331.2	)		(371.3	)
	Share of income from equity investments			5.1			2.1			7.2			11.1
	Foreign currency (losses) gains			(45.8	)		(104.7	)		116.8			(129.7	)
	Loss on extinguishment of debt			(9.4	)		—			(16.7	)		(5.6	)
	Gains (losses) on derivative instruments			43.6			48.0			(104.1	)		79.1

Loss from continuing operations before income taxes				(74.9	)		(118.1	)		(243.0	)		(672.4	)
Income tax benefit				14.8			—			2.4			7.9

	Loss from continuing operations			(60.1	)		(118.1	)		(240.6	)		(664.5	)

Discontinued operations
		Loss from discontinued operations, net of tax		—			(4.6	)		(22.8	)		(11.5	)

Net loss			£	(60.1	)	£	(122.7	)	£	(263.4	)	£	(676.0	)

Basic and diluted loss from continuing operations per share			£	(0.18	)	£	(0.36	)	£	(0.73	)	£	(2.03	)

Basic and diluted loss from discontinued operations per share			£	—		£	(0.01	)	£	(0.07	)	£	(0.03	)

Basic and diluted net loss per share			£	(0.18	)	£	(0.37	)	£	(0.80	)	£	(2.06	)

Dividends per share (in U.S. dollars)			$	0.04		$	0.04		$	0.12		$	0.12

Average number of shares outstanding				329.0			328.1			328.6			328.1

See accompanying notes.

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VIRGIN MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

			Nine months ended September 30,

			2009			2008
						(Adjusted)
Operating activities
Net loss			£	(263.4	)	£	(676.0	)
Loss from discontinued operations				22.8			11.5

Loss from continuing operations				(240.6	)		(664.5	)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities
	Depreciation and amortization			885.5			895.9
	Goodwill impairment			—			362.2
	Non-cash interest			43.3			2.0
	Non-cash compensation			12.0			12.5
	Income from equity accounted investments, net of dividends received			(5.5	)		(3.7	)
	Income taxes			0.4			(4.3	)
	Amortization of original issue discount and deferred finance costs			25.8			16.3
	Unrealized foreign currency (gains) losses			(130.7	)		117.7
	Unrealized losses (gains) on derivative instruments			113.9			(76.9	)
	Loss on extinguishment of debt			15.8			5.6
	Other			(1.0	)		(0.1	)
Changes in operating assets and liabilities				(75.8	)		(65.2	)

		Net cash provided by operating activities		643.1			597.5

Investing activities
	Purchase of fixed and intangible assets			(413.2	)		(338.7	)
	Principal repayments on loans to equity investments			8.9			10.7
	Disposal of sit-up, net			(17.5	)		—
	Other			0.4			1.0

		Net cash used in investing activities		(421.4	)		(327.0	)

Financing activities
	New borrowings, net of financing fees			928.8			493.4
	Proceeds from employee stock option exercises			1.0			0.6
	Principal payments on long term debt and capital leases			(1,035.1	)		(533.2	)
	Dividends paid			(25.1	)		(20.4	)
	Realized gain on derivatives			88.3			—
	Other			(0.3	)		—

		Net cash used in financing activities		(42.4	)		(59.6	)

Cash flow from discontinued operations
	Net cash used in operating activities			(7.9	)		(9.2	)
	Net cash used in investing activities			—			(1.8	)

		Net cash used in discontinued operations		(7.9	)		(11.0	)

Effect of exchange rate changes on cash and cash equivalents				(1.4	)		0.1
Increase in cash and cash equivalents				170.0			200.0
Cash and cash equivalents, beginning of period				181.6			321.4

Cash and cash equivalents, end of period			£	351.6		£	521.4

Supplemental disclosure of cash flow information
Cash paid during the period for interest exclusive of amounts capitalized			£	253.2		£	349.7

See accompanying notes.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1—Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, for interim financial information and with the rules and regulations of the Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. For further information, refer to the consolidated financial statements and notes thereto included in the annual report on Form 10-K for the year ended December 31, 2008, as filed with the SEC on February 26, 2009, and revised by the current report on Form 8-K, as filed with the SEC on May 27, 2009, which we collectively refer to as the 2008 Annual Report.

The 2008 financial information has been adjusted so the basis of presentation is consistent with that of the 2009 financial information. The adjustments reflect (i) the financial condition and results of operations of our sit-up reporting unit as assets and liabilities held for sale and discontinued operations, respectively, in the periods presented, and (ii) the application of new guidance issued by the Financial Accounting Standards Board, or FASB, at Accounting Standards Codification, or ASC, 470-20, or ASC 470-20.

Note 2—Accounting Changes

In May 2008, the FASB issued new guidance which requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer's nonconvertible debt borrowing rate. As a result, the liability component is recorded at a discount reflecting its below market coupon interest rate, and is subsequently accreted to its par value over its expected life, with the rate of interest that reflects the market rate at issuance being reflected in the results of operations.

We adopted the guidance on January 1, 2009 as our convertible senior notes are within its scope. We have applied the guidance on a retrospective basis, whereby our prior period results have been adjusted. As the convertible notes were issued on April 16, 2008, this guidance impacted our previously reported statement of operations for the three and nine months ended September 30, 2008.

We applied a nonconvertible borrowing rate of 10.35% which resulted in the recognition of a discount on the convertible senior notes totaling £108.2 million, with the offsetting amount recognized as a component of additional paid-in capital. In addition, a cumulative translation adjustment of £36.1 million was recognized in relation to prior periods due to the decrease in the foreign denominated debt balance subject to translation during 2008. The following table presents the impact

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 2—Accounting Changes (Continued)

of these adjustments on our previously reported consolidated balance sheet as of December 31, 2008 (in millions):

	December 31, 2008

	As Reported			Adjustments			As Adjusted
Long term debt, net of current portion	£	6,267.7		£	(138.1	)	£	6,129.6
Additional paid-in capital		4,353.1			108.2			4,461.3
Accumulated other comprehensive income		142.1			36.1			178.2
Accumulated deficit		(2,618.9	)		(6.2	)		(2,625.1	)

The additional interest expense and related tax impact that the application of this standard had on our consolidated statement of operations and consolidated statement of cash flows for the nine months ended September 30, 2008 are as follows (in millions, except per share data):

	Nine months ended September 30, 2008

	As Reported			Adjustments			As Adjusted
Consolidated statement of operations:
Interest expense	£	(367.7	)	£	(3.6	)	£	(371.3	)
Income tax benefit		7.9			—			7.9
Net loss		(672.4	)		(3.6	)		(676.0	)
Net loss per share
Basic and diluted		(2.05	)		(0.01	)		(2.06	)
Consolidated statement of cashflows:
Operating activities:
Net loss	£	(672.4	)	£	(3.6	)	£	(676.0	)
Non-cash interest		(1.7	)		3.6			1.9

The amount of interest cost recognized for the contractual interest coupon during the nine months ended September 30, 2008 was £15.3 million. The amount of interest cost recognized for the amortization of the discount on the liability component of the senior convertible notes for the nine months ended September 30, 2008 was £3.6 million.

Note 3—Discontinued Operations

On April 1, 2009, we completed the disposal of our sit-up reporting unit, which was formerly included within our Content segment. sit-up provided a variety of retail consumer products through three interactive auction-based television channels: price-drop tv, bid tv and speed auction tv.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 3—Discontinued Operations (Continued)

was nil and £38.9 million, respectively and for the three and nine months ended September 30, 2008 was £51.0 million and £157.2 million, respectively. sit-up's pre-tax loss, reported within discontinued operations, for the three and nine months ended September 30, 2009 was £nil and £22.8 million, respectively and for the three and nine months ended September 30, 2008 was £4.6 million and £11.5 million, respectively. We wrote down the assets held for sale to fair value at March 31, 2009, resulting in a £19.0 million impairment charge, which is included in the loss from discontinued operations for the nine months ended September 30, 2009.

In accordance with the sale agreement, part of the consideration included a loan note from Aurelius AG. On April 1, 2009, we entered into a five-year carriage agreement with sit-up for continued distribution of the three sit-up channels on our television platform. In general, the agreements governing the loan note and exchange of services between us and sit-up are for specified periods at commercial rates. Following the sale, our continuing involvement with sit-up is limited to the loan note and carriage agreement and is therefore not considered significant.

Note 4—Long Term Debt

Long term debt consisted of (in millions):

		September 30, 2009			December 31, 2008

U.S. Dollar
	8.75% U.S. dollar senior notes due 2014	£	265.6		£	290.7
	9.125% U.S. dollar senior notes due 2016		343.7			376.2
	6.50% U.S. dollar convertible senior notes due 2016		506.8			545.9
	9.50% U.S. dollar senior notes due 2016		818.5			—
	Senior credit facility		278.1			363.8
Euro
	8.75% euro senior notes due 2014		205.7			214.2
	9.50% euro senior notes due 2016		157.5			—
	Senior credit facility		367.6			403.7
Sterling
	9.75% sterling senior notes due 2014		375.0			375.0
	Senior credit facility		2,481.1			3,421.9
	Capital leases		169.2			174.6
	Other		3.2			4.1

			5,972.0			6,170.1
	Less: current portion		(42.2	)		(40.5	)

		£	5,929.8		£	6,129.6

The effective interest rate on the senior credit facility was 5.3% and 7.3% as at September 30, 2009 and December 31, 2008, respectively.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 4—Long Term Debt (Continued)

On June 3, 2009, Virgin Media Finance PLC, or Virgin Media Finance, issued $750 million aggregate principal amount of 9.50% senior notes due 2016 and €180 million aggregate principal amount of 9.50% senior notes due 2016. The 2009 senior notes are unsecured senior obligations of Virgin Media Finance and rank pari passu with Virgin Media Finance's outstanding senior notes due 2014 and 2016. Interest is payable on February 15 and August 15 of each year. The 2009 senior notes mature on August 15, 2016 and are guaranteed by Virgin Media, Virgin Media Group LLC, VMIH and certain other intermediate holding companies of Virgin Media. We used the net proceeds, together with cash on hand, to make repayments totaling £608.5 million under our senior credit facility.

On July 21, 2009, Virgin Media Finance issued an additional $600 million aggregate principal amount of 9.50% senior notes due 2016 under the same terms as the notes issued on June 3, 2009. We used the net proceeds, together with cash on hand, to make repayments totaling £403.6 million under our senior credit facility.

Note 5—Fair Value Measurements

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:


	Level 1		Unadjusted quoted prices in active markets for identical assets or liabilities
	Level 2		Unadjusted quoted prices in active markets for similar assets or liabilities, or
			Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
			Inputs other than quoted prices that are observable for the asset or liability
	Level 3		Unobservable inputs for the asset or liability

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We have determined that all of our financial assets and liabilities that are stated at fair value fall in levels 1 and 2 in the fair value hierarchy described above.

In estimating the fair value of our other financial instruments, we used the following methods and assumptions:

Cash and cash equivalents, and restricted cash: The carrying amounts reported in the consolidated balance sheets approximate fair value due to the short maturity and nature of these financial instruments.

Derivative financial instruments: As a result of our financing activities, we are exposed to market risks from changes in interest and foreign currency exchange rates, which may adversely affect our operating results and financial position. When deemed appropriate, we minimize our risks from interest and foreign currency exchange rate fluctuations through the use of derivative financial instruments. The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using counterparty valuations, or market transactions in either the listed or over-the-counter

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Fair Value Measurements (Continued)

markets, adjusted for non-performance risk. As such, these derivative instruments are classified within level 2 in the fair value hierarchy. The carrying amounts of our derivative financial instruments are disclosed in note 6.

Long term debt: In the following table the fair value of our senior credit facility is based upon quoted trading prices in inactive markets for this debt, which incorporates non-performance risk, and is classified within level 2 of the fair value hierarchy. The fair values of our other debt in the following table are based on the quoted market prices in active markets and incorporate non-performance risk. Accordingly, the inputs used to value these debt instruments are classified within level 1 of the fair value hierarchy.

The carrying amounts and fair values of our long term debt are as follows (in millions):

	September 30, 2009				December 31, 2008

	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior credit facility	£	3,126.8	£	2,989.3	£	4,189.4	£	3,048.0
8.75% U.S. dollar senior notes due 2014		265.6		278.4		290.7		246.7
9.75% sterling senior notes due 2014		375.0		390.0		375.0		292.5
8.75% euro senior notes due 2014		205.7		219.6		214.2		158.8
9.125% U.S. dollar senior notes due 2016		343.7		359.7		376.2		313.1
6.50% U.S. dollar convertible senior notes due 2016		506.8		664.4		545.9		305.1
9.50% U.S. dollar senior notes due 2016		818.5		908.6		—		—
9.50% euro senior notes due 2016		157.5		182.7		—		—

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, trade receivables and derivative contracts.

At September 30, 2009 and December 31, 2008, we had £351.6 million and £181.6 million, respectively, in cash and cash equivalents. These cash and cash equivalents are on deposit with major financial institutions and, as part of our cash management process, we perform regular evaluations of the credit standing of these institutions using a range of metrics. We have not experienced any losses in cash balances and do not believe we are exposed to any significant credit risk on our cash balances.

Concentrations of credit risk with respect to trade receivables are limited because of the large number of customers and their dispersion across geographic areas. We perform periodic credit evaluations of our Business segment customers' financial condition and generally do not require collateral. No single group or customer represents greater than 10% of total accounts receivable.

Concentrations of credit risk with respect to derivative contracts are focused within a limited number of international financial institutions with which we operate and relate only to derivatives with recorded asset balances at September 30, 2009. We perform regular reviews of the financial institutions with which we operate as to their credit worthiness and financial condition. We have not experienced non-performance by any of our derivative counterparties nor do we expect there to be non-performance risks associated with our counterparties. At September 30, 2009, based on market values, we had 62.4% of our derivative contracts with three financial institutions, each with more than 10% of our total exposure. At December 31, 2008, based on market values, we had 54.4% of our derivative contracts with three financial institutions, each with more than 10% of our total exposure.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Derivative Financial Instruments

Strategies and Objectives for Holding Derivative Instruments

Our results are materially impacted by changes in interest rates and foreign currency exchange rates. In an effort to manage these risks, we periodically enter into various derivative instruments including interest rate swaps, cross- currency interest rate swaps and foreign exchange forward rate contracts. We are required to recognize all derivative instruments as either assets or liabilities at fair value on our consolidated balance sheets, and to recognize certain changes in the fair value of derivative instruments on our consolidated statements of operations.

We have entered into cross-currency interest rate swaps and foreign currency forward rate contracts to manage interest rate and foreign exchange rate currency exposures with respect to our U.S. dollar ($) and euro (€) denominated debt obligations. Additionally, we have entered into interest rate swaps to manage interest rate exposures resulting from variable rates of interest we pay on our U.K. pound sterling (£) denominated debt obligations. We have also entered into U.S. dollar, euro and South African rand (ZAR) forward rate contracts to manage our foreign exchange rate currency exposures related to certain committed and forecasted purchases.

Whenever it is practical to do so, we will designate a derivative contract as either a cash flow or fair value hedge for accounting purposes. These derivatives are referred to as "Accounting Hedges" below. When a derivative contract is not designated as an accounting hedge, the derivative will be treated as an economic hedge with mark-to-market movements and realized gains or losses recognized through gains (losses) on derivative instruments in the statements of operations. These derivatives are referred to as "Economic Hedges" below. We do not enter into derivatives for speculative trading purposes.

In respect to Accounting Hedges, we believe our hedge contracts will be highly effective during their term in offsetting changes in cash flow or fair value attributable to the hedged risk. We perform, at least quarterly, both a prospective and retrospective assessment of the effectiveness of our hedge contracts, including assessing the possibility of counterparty default. If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the derivative in gains or losses on derivative instruments in the statement of operations. As a result of our effectiveness assessment at September 30, 2009, we believe our derivative contracts that are designated and qualify for hedge accounting will continue to be highly effective in offsetting changes in cash flow or fair value attributable to the hedged risk.

The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using counterparty valuations, or market transactions in either the listed or over-the-counter markets, adjusted for non-performance risk. As such, these derivative instruments are classified within level 2 in the fair value hierarchy. Derivative instruments which are subject to master netting arrangements are not offset and we have not provided, nor do we require, cash collateral with any counterparty.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Derivative Financial Instruments (Continued)

The fair values of these derivative instruments recorded on our condensed consolidated balance sheets were as follows (in millions):

			September 30, 2009		December 31, 2008

Included within current assets:
	Accounting Hedge
		Foreign currency forward rate contracts	£	0.3	£	37.6
		Interest rate swaps		—		6.1
		Cross-currency interest rate swaps		—		61.5
	Economic Hedge
		Foreign currency forward rate contracts		—		63.2

			£	0.3	£	168.4

Included within non-current assets:
	Accounting Hedge
		Interest rate swaps	£	—	£	—
		Cross-currency interest rate swaps		80.9		136.1
	Economic Hedge
		Cross-currency interest rate swaps		185.8		299.6

			£	266.7	£	435.7

Included within current liabilities:
	Accounting Hedge
		Foreign currency forward rate contracts	£	0.4	£	—
		Interest rate swaps		21.7		2.2
	Economic Hedge
		Foreign currency forward rate contracts		3.3		79.6
		Interest rate swaps		4.2		2.6

			£	29.6	£	84.4

Included within non-current liabilities:
	Accounting Hedge
		Interest rate swaps	£	10.7	£	11.5
		Cross-currency interest rate swaps		33.8		—
	Economic Hedge
		Cross-currency interest rate swaps		24.5		31.1

			£	69.0	£	42.6

Cross-Currency Interest Rate Swaps—Hedging the Interest Payments of Senior Notes and Senior Credit Facility

As of September 30, 2009, we had outstanding cross-currency interest rate swaps to mitigate the interest and foreign exchange rate risks relating to the pound sterling value of interest payments on the U.S. dollar and euro denominated senior notes and senior credit facility.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Derivative Financial Instruments (Continued)

The terms of our outstanding cross-currency interest rate swaps at September 30, 2009 were as follows:

Hedged item/Maturity date		Hedge type	Notional amount due from counterparty		Notional amount due to counterparty		Weighted average interest rate due from counterparty

			(in millions)		(in millions)
$425m senior notes due 2014 October 2011		Accounting	$	425.0	£	291.0	8.75%	9.53%
$550m senior notes due 2016 August 2016		Accounting		550.0		301.2	9.13%	8.54%
$1,350m senior notes due 2016 August 2016		Accounting		1,350.0		835.5	9.50%	9.98%
$1,000m convertible senior notes due 2016 November 2016		Economic		1,000.0		505.6	6.50%	6.95%
Senior credit facility September 2012		Economic		445.1		241.5	3 month $ LIBOR + 2.00%	3 month £ LIBOR + 2.13%

			$	3,770.1	£	2,174.8

€225m senior notes due 2014 October 2011		Accounting	€	225.0	£	207.4	8.75%	8.90%
€180m senior notes due 2016 August 2016		Accounting		180.0		158.6	9.50%	10.18%
Senior credit facility September 2012		Economic		402.2		278.9	3 month EURIBOR + 2.00%	3 month LIBOR + 2.16%

			€	807.2	£	644.9

Other
	December 2012	Economic	€	56.7	£	40.3	3 month EURIBOR + 2.38%	3 month LIBOR + 2.69%
	December 2013	Economic		43.3		30.7	3 month EURIBOR + 2.88%	3 month LIBOR + 3.26%

			€	100.0	£	71.0

	December 2012	Economic	£	38.8	€	56.7	3 month LIBOR + 2.40%	3 month EURIBOR + 2.38%
	December 2013	Economic		29.7		43.3	3 month LIBOR + 2.90%	3 month EURIBOR + 2.88%

			£	68.5	€	100.0

All of our cross-currency interest rate swaps include exchanges of the notional amounts at the start and end of the contract except for the contract maturing in November 2016 hedging the $1,000 million convertible senior notes due 2016.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Derivative Financial Instruments (Continued)

Interest Rate Swaps—Hedging of Interest Rate Sensitive Obligations

As of September 30, 2009, we had outstanding interest rate swap agreements to manage the exposure to variability in future cash flows on the interest payments associated with our senior credit facility, which accrue at variable rates based on LIBOR. The interest rate swaps allow us to receive interest based on three and six month LIBOR in exchange for payments of interest at fixed rates.

The terms of our outstanding interest rate swap contracts at September 30, 2009 were as follows:

Hedged item/Maturity date		Hedge type	Notional amount		Weighted average interest rate due from counterparty

			(in millions)
Senior credit facility
	April 2010	Accounting		£2,400.0	3 month LIBOR	2.31%
	April 2010	Economic		600.0	3 month LIBOR	1.66%
	April 2010 to April 2011	Accounting		200.0	3 month LIBOR	2.58%
	April 2010 to September 2012	Accounting		1,300.0	3 month LIBOR	3.07%
	April 2010 to March 2013	Accounting		300.0	3 month LIBOR	3.28%

Foreign Currency Forward Rate Contracts—Hedging Committed and Forecasted Transactions

As of September 30, 2009, we had outstanding foreign currency forward rate contracts to purchase U.S. dollars, euros and South African rand to hedge committed and forecasted purchases. The terms of our outstanding foreign currency forward rate contracts at September 30, 2009 were as follows:

Hedged item/Maturity date		Hedge type	Notional amount due from counterparty	Notional amount due to counterparty	Weighted average exchange rate

			(in millions)	(in millions)
Commited and forecasted purchases
	October 2009 to June 2010	Economic	$66.9	£45.2	1.4811
	December 2009 to June 2010	Accounting	$8.5	£5.7	1.4810
	October 2009 to January 2010	Accounting	€1.0	£0.9	1.1250
	October 2009 to January 2010	Accounting	ZAR 16.4	£1.1	15.3587

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow accounting hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. In our consolidated statement of cash flows, we recognize the cash flows resulting from derivative contracts that are treated as Accounting Hedges in the same category where the cash flows from the underlying exposure are recognized. All other cash flows from derivative contracts are recognized as operating activities in the consolidated statement of cash flows.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Derivative Financial Instruments (Continued)

Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized as gains or losses on derivative instruments in the statement of operations in the period in which they occur. We reclassified into earnings losses totaling £nil and £1.9 million as a result of the discontinuance of cash flow hedges during the three and nine months ended September 30, 2009, respectively. During the three and nine months ended September 30, 2009, we recognized losses totaling £0.8 million and £0.9 million, respectively, relating to ineffectiveness. The following tables present the effective amount of gain or (loss) recognized in other comprehensive income and amounts reclassified to earnings during the three and nine months ended September 30, 2009 (in millions):

		Total			Interest rate swaps			Cross-currency interest rate swaps			Forward foreign exchange contracts			Tax Effect

								(in millions)
Balance at December 31, 2008		£	40.1		£	(7.9	)	£	64.0		£	—		£	(16.0	)
Amounts recognized in other comprehensive income			(30.6	)		(14.1	)		(16.9	)		0.4			—
Amounts reclassified to earnings impacting:
	Foreign exchange gain		(2.8	)		—			(2.8	)		—			—
	Interest expense		(2.1	)		2.0			(4.1	)		—			—
Tax effect recognized			9.9			—			—			—			9.9

Balance at March 31, 2009		£	14.5		£	(20.0	)	£	40.2		£	0.4		£	(6.1	)

Amounts recognized in other comprehensive income			(167.6	)		14.6			(181.3	)		(0.9	)		—
Amounts reclassified to earnings impacting:
	Foreign exchange loss		152.3			—			152.3			—			—
	Interest expense		5.0			4.6			0.4			—			—
	Operating costs		0.1			—			—			0.1			—
Tax effect recognized			2.9			—			—			—			2.9

Balance at June 30, 2009		£	7.2		£	(0.8	)	£	11.6		£	(0.4	)	£	(3.2	)

Amounts recognized in other comprehensive income			26.9			(38.4	)		65.1			0.2			—
Amounts reclassified to earnings impacting:
	Foreign exchange gain		(60.0	)		—			(60.0	)		—			—
	Interest expense		10.0			7.6			2.4			—			—
	Operating costs		0.2			—			—			0.2			—
Tax effect recognized			(12.8	)		—			—			—			(12.8	)

Balance at September 30, 2009		£	(28.5	)	£	(31.6	)	£	19.1		£	—		£	(16.0	)

Assuming no change in interest rates or foreign exchange rates for the next twelve months, the amount of pre-tax losses that would be reclassified from other comprehensive income to earnings would be £18.8 million, £1.2 million and £nil relating to interest rate swaps, cross-currency interest rate swaps and forward foreign exchange contracts, respectively.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 7—Restructuring and Other Charges

Restructuring and other charges of £1.6 million for the three months ended September 30, 2009 related primarily to lease exit costs in relation to our historic restructuring activities. Restructuring and other charges of £30.6 million for the nine months ended September 30, 2009 related primarily to employee termination and lease exit costs in connection with the restructuring program initiated in the last quarter of 2008 as discussed below. Restructuring and other charges of £nil and £2.9 million for the three and nine months ended September 30, 2008, respectively, related mainly to lease exit and employee termination costs as a result of our acquisition-related restructuring programs net of revisions to previously accrued amounts.

During the fourth quarter of 2008, we commenced the implementation of a restructuring plan aimed at driving further improvements in our operational performance and eliminating inefficiencies in order to create a fully-integrated, customer-focused organization. This plan involves the incurrence of substantial operating and capital expenditures, including certain costs which may be treated as restructuring costs. In total, we expect to incur operating expenditures of between £120 million to £140 million and capital expenditures of between £50 million to £60 million in connection with this plan over a three-year period.

The following tables summarize our historical restructuring accruals, the restructuring accruals resulting from the acquisitions made by us during 2006 and the accruals for our restructuring plan announced in 2008 (in millions):

	Historical Restructuring Accruals			2006 Acquisition Restructuring Accruals			2008 Restructuring Accruals

Three months ended September 30, 2009	Lease Exit Costs			Lease Exit Costs			Involuntary Employee Termination and Related Costs			Lease and Contract Exit Costs			Total
Balance, June 30, 2009	£	14.9		£	31.3		£	13.1		£	13.0		£	72.3
Charged to expense		0.6			0.6			3.6			2.0			6.8
Revisions		0.5			(0.7	)		(4.3	)		(0.7	)		(5.2	)
Utilized		(0.8	)		(1.6	)		(7.5	)		(1.4	)		(11.3	)

Balance, September 30, 2009	£	15.2		£	29.6		£	4.9		£	12.9		£	62.6

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 7—Restructuring and Other Charges (Continued)

	Historical Restructuring Accruals			2006 Acquisition Restructuring Accruals			2008 Restructuring Accruals

Nine months ended September 30, 2009	Lease Exit Costs			Lease Exit Costs			Involuntary Employee Termination and Related Costs			Lease and Contract Exit Costs			Total
Balance, December 31, 2008	£	16.5		£	38.5		£	2.0		£	14.0		£	71.0
Charged to expense		2.3			3.2			21.6			16.1			43.2
Revisions		(0.7	)		(6.9	)		(4.3	)		(0.7	)		(12.6	)
Utilized		(2.9	)		(5.2	)		(14.4	)		(16.5	)		(39.0	)

Balance, September 30, 2009	£	15.2		£	29.6		£	4.9		£	12.9		£	62.6

Note 8—Stockholders' Equity and Share Based Compensation

During the year ended December 31, 2008 and the nine months ended September 30, 2009, we paid the following dividends:

Board Declaration Date	Per Share				Total Amount

					(in millions)
Year ended December 31, 2008:
February 6, 2008	$	0.04	March 12, 2008	March 20, 2008	£	6.6
May 21, 2008		0.04	June 12, 2008	June 20, 2008		6.7
September 2, 2008		0.04	September 12, 2008	September 22, 2008		7.1
November 25, 2008		0.04	December 12, 2008	December 22, 2008		8.9
Nine months ended September 30, 2009:
February 27, 2009	$	0.04	March 12, 2009	March 20, 2009	£	9.0
May 29, 2009		0.04	June 12, 2009	June 22, 2009		8.0
August 27, 2009		0.04	September 11, 2009	September 21, 2009		8.1

Future payments of regular quarterly dividends by us are at the discretion of the Board of Directors and will be subject to our future needs and uses of cash, which could include investments in operations, the repayment of debt, and share repurchase programs. In addition, the terms of our and our subsidiaries' existing and future indebtedness and the laws of jurisdictions under which those subsidiaries are organized limit the payment of dividends, loan repayments and other distributions to us under many circumstances.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 8—Stockholders' Equity and Share Based Compensation (Continued)

The average number of shares outstanding for the three and nine months ended September 30, 2009 and 2008 is computed as follows (in millions):

	Three months ended September 30,				Nine months ended September 30,

	2009		2008		2009		2008
Number of shares outstanding at start of period		328.9		328.1		328.1		327.5
Issues of common stock (average number outstanding during the period)		0.1		—		0.5		0.6

Average number of shares outstanding		329.0		328.1		328.6		328.1

Total share based compensation expense included in selling, general and administrative expenses in the statements of operations was £6.1 million and £5.3 million for the three months ended September 30, 2009 and 2008, respectively, and £12.0 million and £12.5 million for the nine months ended September 30, 2009 and 2008, respectively.

Basic and diluted net loss per share is computed by dividing the net loss for the three and nine months ended September 30, 2009 and 2008 by the weighted average number of shares outstanding during the respective periods. Options, warrants, shares issuable under our convertible senior notes and shares of restricted stock held in escrow at September 30, 2009 and 2008 are excluded from the calculation of diluted loss per share, since these securities are anti-dilutive.

Convertible Senior Notes

On April 16, 2008, Virgin Media Inc. issued U.S. dollar denominated 6.50% convertible senior notes due 2016 with a principal amount outstanding of $1.0 billion. Holders of convertible senior notes may tender their notes for conversion at any time on or after August 15, 2016 through to the second scheduled trading date preceding the maturity date. Prior to August 15, 2016, holders may convert their notes, at their option, only under the following circumstances: (i) in any quarter, if the closing sale price of Virgin Media Inc.'s common stock during at least 20 of the last 30 trading days of the prior quarter was more than 120% of the applicable conversion price per share of common stock on the last day of such prior quarter; (ii) if, for five consecutive trading days, the trading price per $1,000 principal amount of notes was less than 98% of the product of the closing price of our common stock and the then applicable conversion rate; (iii) if a specified corporate event occurs, such as a merger, recapitalization, reclassification, binding share exchange or conveyance of all, or substantially all, of Virgin Media Inc.'s assets; (iv) the declaration by Virgin Media Inc. of the distribution of certain rights, warrants, assets or debt securities to all, or substantially all, holders of Virgin Media Inc.'s common stock; or (v) if Virgin Media Inc. undergoes a fundamental change (as defined in the indenture governing the convertible senior notes), such as a change in control, merger, consolidation, dissolution or delisting.

The initial conversion rate is equal to 52.0291 shares of Virgin Media Inc.'s common stock per $1,000 of convertible senior notes, which represents an initial conversion price of approximately $19.22 per share of common stock. The conversion rate is subject to adjustment for stock splits, stock

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 8—Stockholders' Equity and Share Based Compensation (Continued)

dividends or distributions, the issuance of certain rights or warrants, certain cash dividends or distributions or stock repurchases where the price exceeds market values.

Stock Option Grants

Under the Virgin Media Inc. Stock Incentive Plan, options to purchase up to 29.0 million shares of our common stock may be granted from time to time to certain of our employees and our subsidiaries. Accordingly, we have reserved 29.0 million shares of common stock for issuance under the Virgin Media Inc. Stock Incentive Plan. All options have a 10 year term and vest and become fully exercisable within five years of continued employment.

Non Vested Shares of Restricted Stock

Non vested shares of restricted stock vest after a period of between one and three years based on service or performance criteria and continued employment.

Restricted Stock Units

Restricted stock units vest after a three year period dependent on the achievement of certain long term performance targets and continued employment. The final number of restricted stock units vesting will be settled, at our discretion, in either common stock or an amount of cash equivalent to the fair market value at the date of vesting.

Series A Warrants

Warrants are exercisable for a total of 25,769,060 shares of our common stock at an exercise price of $105.17 per share. The Series A warrants expire on January 10, 2011.

Note 9—Comprehensive Loss

Comprehensive loss comprises (in millions):

	Three months ended September 30,						Nine months ended September 30,

	2009			2008			2009			2008
				(Adjusted)						(Adjusted)
Net loss for period	£	(60.1	)	£	(122.7	)	£	(263.4	)	£	(676.0	)
Currency translation adjustment		4.0			11.8			(10.9	)		10.9
Net unrealized gains (losses) on derivatives, net of tax		41.8			18.5			(100.8	)		46.1
Reclassification of derivative (losses) gains to net income, net of tax		(77.5	)		(24.1	)		32.2			(35.7	)

Comprehensive loss	£	(91.8	)	£	(116.5	)	£	(342.9	)	£	(654.7	)

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 9—Comprehensive Loss (Continued)

The components of accumulated other comprehensive income, net of taxes, were as follows (in millions):

	September 30, 2009			December 31, 2008

Foreign currency translation	£	158.7		£	169.6
Pension liability adjustments		(31.5	)		(31.5	)
Net unrealized gains on derivatives		(28.5	)		40.1

	£	98.7		£	178.2

Note 10—Income Taxes

At each period end, it is necessary for us to make certain estimates and assumptions to compute the provision for income taxes including, but not limited to, the expected operating income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in the United Kingdom and the extent to which this income (or loss) may also be taxed in the United States, permanent and temporary differences, the likelihood of deferred tax assets being recovered and the outcome of contingent tax risks. At each interim period, management uses the best information available to develop these estimates and assumptions, which are used to compute the forecast effective tax rate for the full year which is applied in computing the income tax expense or benefit for the interim period. In accordance with U.S. GAAP, the impact of revisions to these estimates are recorded as income tax expense or benefit in the period in which they become known. Accordingly, the accounting estimates used to compute the provision for income taxes have changed and will change as new events occur, as more experience is acquired, as additional information is obtained and our tax environment changes. To the extent that the estimate changes during a subsequent quarter, the effect of the change on prior quarters as well as on the current quarter is included in income tax expense for the current quarter.

Our income tax benefit for the three and nine months ended September 30, 2009 and 2008 was as follows (in millions):

		Three months ended September 30,						Nine months ended September 30,

		2009			2008			2009			2008
Income tax (expense) benefit:
	Current federal taxes	£	2.1		£	0.2		£	1.9		£	(0.2	)
	U.S. state and local tax		(0.1	)		(0.1	)		(0.1	)		(0.1	)
	Deferred federal taxes		(1.5	)		1.0			(3.6	)		(6.5	)
	U.K. current tax		1.5			1.1			4.2			3.6
	U.K. deferred tax		12.8			(2.2	)		—			11.1

Total tax		£	14.8		£	—		£	2.4		£	7.9

The U.K. current tax benefit related to amounts receivable in respect of the sale of U.K. tax losses to an equity-method investee. The U.K. deferred tax benefit relates to an increase in our deferred tax asset valuation allowance as a result of a reduction in certain deferred tax liabilities relating to amounts recognized in the statement of other comprehensive income during the period.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense in the statements of operations.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 11—Recent Accounting Pronouncements

In June 2009, the FASB issued guidance relating to the FASB Accounting Standards Codification at ASC 105. Effective for interim or annual financial periods ending after September 15, 2009, the ASC will become the single official source of authoritative U.S. GAAP (other than guidance issued by the SEC), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force (EITF), and related literature. After September 15, 2009, only one level of authoritative U.S. GAAP will exist. All other literature will be considered non-authoritative. The ASC does not change U.S. GAAP; instead, it introduces a new structure that is organized in an easily accessible, user-friendly online research system. We have adopted the disclosure requirements of this guidance.

In December 2007, the FASB issued new accounting guidance for business combinations at ASC 805. This guidance requires the acquiring entity in a business combination to prospectively recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires expensing of most transaction and restructuring costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. Further, regardless of the business combination date, any subsequent changes to acquired uncertain tax positions and valuation allowances associated with acquired deferred tax assets will no longer be applied to goodwill but will be recognized as an adjustment to income tax expense. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued new accounting guidance for noncontrolling interests in subsidiaries at ASC 810. This guidance establishes requirements for ownership interests in subsidiaries held by parties other than ourselves (sometimes called "minority interests") to be clearly identified, presented, and disclosed in the consolidated statement of financial position within equity, but separate from the parent's equity. All changes in the parent's ownership interests are required to be accounted for consistently as equity transactions and any non controlling equity investments in unconsolidated subsidiaries must be measured initially at fair value. This guidance is effective, on a prospective basis, for fiscal years beginning after December 15, 2008; however, presentation and disclosure requirements must be retrospectively applied to comparative financial statements. The account balances recorded in our consolidated financial statements relating to noncontrolling interests are immaterial and therefore, the disclosure requirements have not been applied as permitted by the provisions of the guidance.

In April 2009, the FASB issued new accounting guidance for disclosures about the fair value of financial instruments in interim reporting periods at ASC 825. Such disclosures were previously required only in annual financial statements. This guidance is effective for financial statements issued for all periods ending after June 15, 2009. We have adopted the disclosure requirements of this guidance.

In May 2009, the FASB issued new accounting guidance for the disclosure of subsequent events at ASC 855, effective for financial statements issued for all periods ending after June 15, 2009. The guidance establishes general standards of accounting for, and requires disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted this guidance during the second quarter of 2009. In accordance with this guidance, we have

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 11—Recent Accounting Pronouncements (Continued)

evaluated subsequent events through the date and time the financial statements were issued on October 29, 2009.

In September 2009, the FASB ratified new accounting guidance for existing multiple-element revenue arrangements at ASC 605.25. The revised multiple-element revenue arrangements guidance will be effective for the first annual reporting period beginning on or after June 15, 2010 and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. We have not yet adopted the provisions of this guidance and are evaluating the impact on our consolidated financial statements.

Note 12—Contingent Liabilities

We are involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employee and employee benefits which arise in the ordinary course of our business. We recognize a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We believe we have adequate provisions for any such matters. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Whilst litigation is inherently unpredictable, we believe that we have valid defenses with respect to legal matters pending against us. Nevertheless, it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies, or because of the diversion of management's attention and the creation of significant expenses.

Note 13—Industry Segments

Our previously reported operating segments were based on how we distributed our services. Distribution through cable systems, delivery of television content, and provision of mobile phone services made up the core of our business and were the focus of how the business was managed internally through our former Cable, Content and Mobile segments.

As a result of the business reorganization initiated in 2008, we have realigned our internal reporting structure and the related financial information used by management and the CODM. Our operating structures have been revised to build a customer-focused organization able to respond effectively to rapid changes in the market, technology and customer demands through our three customer-based segments: Consumer, Business and Content.

Our Consumer segment, part of which was previously included within our Cable segment, is our primary segment, consisting of the distribution of television programming, broadband and fixed line telephone services to consumers on our cable network and, to a lesser extent, off our cable network.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 13—Industry Segments (Continued)

The Consumer segment also includes our former Mobile segment consisting of our mobile telephony and broadband business.

Our Business segment, which was previously part of our Cable segment, comprises our operations carried out through ntl:Telewest Business which provides a complete portfolio of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K.

We operate our Content segment through Virgin Media TV, which supplies television programming to the U.K. pay-television broadcasting market.

The 2008 fiscal year amounts have been adjusted to conform to the current period presentation. Subsequent to the year end, management performed an exercise to reallocate goodwill and other indefinite-lived intangible assets that had been previously recognized in the former Cable and Mobile reporting units to our Consumer and Business reporting units. As a result of this review, goodwill and indefinite-lived intangible assets totaling £1,817.1 million and £206.4 million were allocated to the Consumer and Business reporting units, respectively. We also performed an interim impairment review of the goodwill related to the former Mobile reporting unit as at January 1, 2009 and concluded that the goodwill was not impaired. Goodwill and indefinite-lived assets recognized in our Consumer and Business reporting units will be tested for impairment on an annual basis on October 1 of each year. As at June 30, 2009, we performed our annual impairment review of goodwill recognized in the Content segment and concluded that the fair value of the reporting unit exceeded its carrying value.

Segment contribution, which is operating income (loss) before network operating costs, corporate costs, depreciation, amortization, goodwill and intangible asset impairments and restructuring and other charges, is management's measure of segment profit. Segment contribution excludes the impact of certain costs and expenses that are not directly attributable to the reporting segments, such as the costs of operating the network, corporate costs and depreciation and amortization. Restructuring and other charges, and goodwill and intangible asset impairments are excluded from segment contribution as management believes they are not characteristic of our underlying business operations. Assets are reviewed on a consolidated basis and are not allocated to segments for management reporting since the primary asset of the business is the cable network infrastructure, which is shared by our Consumer and Business segments.

Segment information for the three and nine month periods ended September 30, 2009 and 2008 was as follows (in millions):

	Three months ended September 30, 2009

	Consumer		Business		Content			Total
Revenue	£	776.1	£	143.3	£	34.0		£	953.4
Inter segment revenue		—		—		7.0			7.0
Segment contribution	£	466.4	£	86.3	£	(0.4	)	£	552.3

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 13—Industry Segments (Continued)

	Three months ended September 30, 2008

	Consumer		Business		Content			Total
Revenue	£	756.6	£	153.4	£	30.9		£	940.9
Inter segment revenue		—		0.1		6.4			6.5
Segment contribution	£	450.5	£	83.3	£	(3.6	)	£	530.2

	Nine months ended September 30, 2009

	Consumer		Business		Content		Total
Revenue	£	2,287.0	£	435.6	£	102.3	£	2,824.9
Inter segment revenue		—		—		20.2		20.2
Segment contribution	£	1,358.6	£	252.6	£	12.9	£	1,624.1

	Nine months ended September 30, 2008

	Consumer		Business		Content		Total
Revenue	£	2,269.8	£	470.9	£	87.6	£	2,828.3
Inter segment revenue		—		0.3		19.2		19.5
Segment contribution	£	1,357.3	£	248.8	£	0.3	£	1,606.4

The reconciliation of total segment contribution to our consolidated operating income (loss) is as follows (in millions):

		Three months ended September 30,					Nine months ended September 30,

		2009		2008			2009		2008
Total segment contribution		£	552.3	£	530.2		£	1,624.1	£	1,606.4
	Other operating and corporate costs		203.9		203.9			629.6		622.3
	Depreciation		235.6		213.7			702.2		674.2
	Amortization		61.0		63.3			183.3		221.7
	Restructuring and other charges		1.6		—			30.6		2.9
	Goodwill impairment		—		(4.0	)		—		362.2

Consolidated operating income (loss)		£	50.2	£	53.3		£	78.4	£	(276.9	)

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information

On April 13, 2004, Virgin Media Finance issued £375 million aggregate principal amount of 9.75% senior notes due 2014, $425 million aggregate principal amount of 8.75% senior notes due 2014, and €225 million aggregate principal amount of 8.75% senior notes due 2014. On July 25, 2006, Virgin Media Finance issued $550 million aggregate principal amount of 9.125% senior notes due 2016. On June 3, 2009, Virgin Media Finance issued $750 million aggregate principal amount of 9.50% senior notes due 2016 and €180 million aggregate principal amount of 9.50% senior notes due 2016 and on July 21, 2009 Virgin Media Finance issued a further $600 million aggregate principle amounts of 9.50% senior notes due 2016. Virgin Media Inc. and certain of its subsidiaries, namely Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited, have guaranteed the senior notes on a senior basis. VMIH has guaranteed the senior notes on a senior subordinated basis.

We present the following condensed consolidated financial information as of September 30, 2009 and December 31, 2008 and for the three and nine months ended September 30, 2009 and 2008 as required by Rule 3-10(d) of Regulation S-X.

		September 30, 2009

Balance sheets		Company		Virgin Media Finance			Other guarantors			VMIH		All other subsidiaries			Adjustments			Total
		(in millions)
Cash and cash equivalents		£	12.4	£	—		£	0.8		£	288.3	£	50.1		£	—		£	351.6
Restricted cash			—		—			—			—		6.0			—			6.0
Other current assets			4.8		—			0.2			10.2		615.9			—			631.1

	Total current assets		17.2		—			1.0			298.5		672.0			—			988.7
Fixed assets, net			—		—			—			—		5,098.8			—			5,098.8
Goodwill and intangible assets, net			—		—			(15.0	)		—		2,424.5			—			2,409.5
Investments in, and loans to, parent and subsidiary companies			2,159.3		906.0			(784.0	)		3,001.5		(6,340.8	)		1,413.3			355.3
Other assets, net			10.9		—			—			322.8		85.1			—			418.8

	Total assets	£	2,187.4	£	906.0		£	(798.0	)	£	3,622.8	£	1,939.6		£	1,413.3		£	9,271.1

Other current liabilities		£	19.7	£	79.5		£	39.0		£	163.3	£	1,925.5		£	(850.6	)	£	1,376.4
Long term debt, net of current portion			506.8		2,165.9			—			1,810.0		1,447.1			—			5,929.8
Other long term liabilities			—		—			0.7			43.8		259.5			—			304.0
Shareholders' equity (deficit)			1,660.9		(1,339.4	)		(837.7	)		1,605.7		(1,692.5	)		2,263.9			1,660.9

	Total liabilities and shareholders' equity	£	2,187.4	£	906.0		£	(798.0	)	£	3,622.8	£	1,939.6		£	1,413.3		£	9,271.1

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information (Continued)

		December 31, 2008

Balance sheets		Company		Virgin Media Finance			Other guarantors			VMIH		All other subsidiaries			Adjustments			Total
		(in millions)
Cash and cash equivalents		£	9.9	£	—		£	1.2		£	0.4	£	170.1		£	—		£	181.6
Restricted cash			—		—			—			—		6.1			—			6.1
Other current assets			3.5		—			0.3			187.7		620.1			—			811.6
Current assets held for sale			—		—			—			—		56.2			—			56.2

	Total current assets		13.4		—			1.5			188.1		852.5			—			1,055.5
Fixed assets, net			—		—			—			—		5,342.1			—			5,342.1
Goodwill and intangible assets, net			—		—			(15.0	)		—		2,607.6			—			2,592.6
Investments in, and loans to, parent and subsidiary companies			2,544.9		287.9			(487.7	)		3,519.4		(6,591.5	)		1,080.5			353.5
Other assets, net			13.2		—			—			506.5		69.9			—			589.6

	Total assets	£	2,571.5	£	287.9		£	(501.2	)	£	4,214.0	£	2,280.6		£	1,080.5		£	9,933.3

Other current liabilities		£	9.4	£	37.1		£	26.1		£	197.1	£	1,381.3		£	(171.6	)	£	1,479.4
Current liabilities held for sale			—		—			—			—		36.2			—			36.2

	Total current liabilities		9.4		37.1			26.1			197.1		1,417.5			(171.6	)		1,515.6
Long term debt, net of current portion			545.9		1,256.2			—			2,064.6		2,262.9			—			6,129.6
Other long term liabilities			—		—			0.7			11.5		259.7			—			271.9
Shareholders' equity (deficit)			2,016.2		(1,005.4	)		(528.0	)		1,940.8		(1,659.5	)		1,252.1			2,016.2

	Total liabilities and shareholders' equity	£	2,571.5	£	287.9		£	(501.2	)	£	4,214.0	£	2,280.6		£	1,080.5		£	9,933.3

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information (Continued)

	Three months ended September 30, 2009

Statements of operations	Company			Virgin Media Finance			Other guarantors			VMIH			All other subsidiaries			Adjustments			Total
	(in millions)
Revenue	£	—		£	—		£	—		£	—		£	953.4		£	—		£	953.4
Operating costs		—			—			—			—			(403.8	)		—			(403.8	)
Selling, general and administrative expenses		(7.3	)		—			(0.6	)		—			(193.3	)		—			(201.2	)
Restructuring and other charges		—			—			—			—			(1.6	)		—			(1.6	)
Depreciation and amortization		—			—			—			—			(296.6	)		—			(296.6	)

Operating income (loss)		(7.3	)		—			(0.6	)		—			58.1			—			50.2
Interest and other income, net		9.8			53.5			33.1			16.6			119.4			(231.1	)		1.3
Interest expense		(13.5	)		(52.9	)		(26.9	)		(96.6	)		(161.1	)		231.1			(119.9	)
Share of income from equity investments		—			—			—			—			5.1			—			5.1
Foreign currency (losses) gains		(0.3	)		(1.6	)		—			(45.2	)		1.3			—			(45.8	)
Loss on extinguishment of debt		—			—			—			(4.0	)		(5.4	)		—			(9.4	)
Gains on derivative instruments		—			—			—			43.6			—			—			43.6
Income tax benefit (expense)		1.5			—			0.6			14.2			(1.5	)		—			14.8

(Loss) income from continuing operations		(9.8	)		(1.0	)		6.2			(71.4	)		15.9			—			(60.1	)
Equity in net income (loss) of subsidiaries		(50.3	)		(59.5	)		(56.4	)		11.7			—			154.5			—

Net (loss) income	£	(60.1	)	£	(60.5	)	£	(50.2	)	£	(59.7	)	£	15.9		£	154.5		£	(60.1	)

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information (Continued)

	Nine months ended September 30, 2009

Statements of operations	Company			Virgin Media Finance			Other guarantors			VMIH			All other subsidiaries			Adjustments			Total
	(in millions)
Revenue	£	—		£	—		£	—		£	—		£	2,824.9		£	—		£	2,824.9
Operating costs		—			—			—			—			(1,222.1	)		—			(1,222.1	)
Selling, general and administrative expenses		(13.9	)		—			(1.9	)		(0.1	)		(592.4	)		—			(608.3	)
Restructuring and other charges		—			—			—			—			(30.6	)		—			(30.6	)
Depreciation and amortization		—			—			—			—			(885.5	)		—			(885.5	)

Operating income (loss)		(13.9	)		—			(1.9	)		(0.1	)		94.3			—			78.4
Interest income and other, net		31.6			132.8			103.1			53.8			367.7			(682.4	)		6.6
Interest expense		(43.2	)		(131.1	)		(84.7	)		(259.3	)		(495.3	)		682.4			(331.2	)
Share of income from equity investments		—			—			—			—			7.2			—			7.2
Foreign currency gains (losses)		0.6			(0.5	)		(0.5	)		89.5			27.7			—			116.8
Loss on extinguishment of debt		—			—			—			(8.2	)		(8.5	)		—			(16.7	)
(Losses) gains on derivative instruments		—			—			—			(104.3	)		0.2			—			(104.1	)
Income tax benefit (expense)		1.4			—			0.5			4.1			(3.6	)		—			2.4

(Loss) income from continuing operations		(23.5	)		1.2			16.5			(224.5	)		(10.3	)		—			(240.6	)
Loss from discontinued operations, net of tax		—			—			—			—			(22.8	)		—			(22.8	)
Equity in net loss of subsidiaries		(239.9	)		(265.9	)		(256.9	)		(41.4	)		—			804.1			—

Net loss	£	(263.4	)	£	(264.7	)	£	(240.4	)	£	(265.9	)	£	(33.1	)	£	804.1		£	(263.4	)

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information (Continued)

	Three months ended September 30, 2008

Statements of operations	Company			Virgin Media Finance			Other guarantors			VMIH			All other subsidiaries			Adjustments			Total
	(Adjusted) (in millions)
Revenue	£	—		£	—		£	—		£	—		£	940.9		£	—		£	940.9
Operating costs		—			—			—			—			(398.5	)		—			(398.5	)
Selling, general and administrative expenses		(5.2	)		—			—			—			(210.9	)		—			(216.1	)
Depreciation and amortization		—			—			—			—			(277.0	)		—			(277.0	)
Goodwill impairment		—			—			—			—			4.0			—			4.0

Operating income (loss)		(5.2	)		—			—			—			58.5			—			53.3
Interest income and other, net		8.5			32.4			30.2			17.5			(5.9	)		(74.9	)		7.8
Interest expense		(11.2	)		(33.2	)		(23.8	)		(83.5	)		(47.8	)		74.9			(124.6	)
Share of income from equity investments		—			—			—			—			2.1			—			2.1
Foreign currency losses		(0.2	)		(0.9	)		(0.6	)		(80.2	)		(22.8	)		—			(104.7	)
Gains (losses) on derivative instruments		—			—			—			55.1			(7.1	)		—			48.0
Income tax benefit (expense)		—			—			1.6			(2.2	)		0.6			—			—

(Loss) income from continuing operations		(8.1	)		(1.7	)		7.4			(93.3	)		(22.4	)		—			(118.1	)
Loss from discontinued operations, net of tax		—			—			—			—			(4.6	)		—			(4.6	)
Equity in net loss of subsidiaries		(114.6	)		(122.1	)		(122.1	)		(28.8	)		—			387.6			—

Net loss	£	(122.7	)	£	(123.8	)	£	(114.7	)	£	(122.1	)	£	(27.0	)	£	387.6		£	(122.7	)

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information (Continued)

	Nine months ended September 30, 2008

Statements of operations	Company			Virgin Media Finance			Other guarantors			VMIH			All other subsidiaries			Adjustments			Total
	(Adjusted) (in millions)
Revenue	£	—		£	—		£	—		£	—		£	2,828.3		£	—		£	2,828.3
Operating costs		—			—			—			—			(1,215.5	)		—			(1,215.5	)
Selling, general and administrative expenses		(17.4	)		—			—			—			(611.3	)		—			(628.7	)
Restructuring and other charges		—			—			—			—			(2.9	)		—			(2.9	)
Depreciation and amortization		—			—			—			—			(895.9	)		—			(895.9	)
Goodwill impairment		—			—			—			—			(362.2	)		—			(362.2	)

Operating loss		(17.4	)		—			—			—			(259.5	)		—			(276.9	)
Interest income and other, net		15.4			88.6			70.1			51.7			(22.7	)		(182.2	)		20.9
Interest expense		(20.8	)		(89.7	)		(50.8	)		(250.2	)		(142.0	)		182.2			(371.3	)
Share of income from equity investments		—			—			—			—			11.1			—			11.1
Foreign currency losses		(0.3	)		(1.3	)		(0.7	)		(102.6	)		(24.8	)		—			(129.7	)
Loss on extinguishment of debt		—			—			—			(4.4	)		(1.2	)		—			(5.6	)
Gains (losses) on derivative instruments		—			—			—			83.2			(4.1	)		—			79.1
Income tax benefit (expense)		(0.1	)		—			(3.9	)		11.1			0.8			—			7.9

(Loss) income from continuing operations		(23.2	)		(2.4	)		14.7			(211.2	)		(442.4	)		—			(664.5	)
Loss from discontinued operations, net of tax		—			—			—			—			(11.5	)		—			(11.5	)
Equity in net loss of subsidiaries		(652.8	)		(666.5	)		(667.9	)		(455.3	)		—			2,442.5			—

Net loss	£	(676.0	)	£	(668.9	)	£	(653.2	)	£	(666.5	)	£	(453.9	)	£	2,442.5		£	(676.0	)

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information (Continued)

		Nine months ended September 30, 2009

Statement of cash flows		Company			Virgin Media Finance			Other guarantors			VMIH			All other subsidiaries			Adjustments		Total
		(in millions)
Net cash provided by (used in)
	operating activities	£	(6.7	)	£	—		£	(1.6	)	£	(106.1	)	£	757.5		£	—	£	643.1
Investing activities:
Purchase of fixed and intangible assets			—			—			—			—			(413.2	)		—		(413.2	)
Principal repayments on loans to equity investments			—			—			—			—			8.9			—		8.9
Principal drawdowns (repayments) on loans to group companies			—			(961.5	)		1.2			591.9			368.4			—		—
Disposal of sit-up, net			—			—			—			—			(17.5	)		—		(17.5	)
Other			—			—			—			—			0.4			—		0.4

Net cash (used in) provided by investing activities			—			(961.5	)		1.2			591.9			(53.0	)		—		(421.4	)

Financing activities:
New borrowings, net of financing activities			—			961.5			—			(22.8	)		(9.9	)		—		928.8
Proceeds from employee stock option exercises			1.0			—			—			—			—			—		1.0
Principal payments on long term debt and capital leases			—			—			—			(233.5	)		(801.6	)		—		(1,035.1	)
Intercompany funding movements			35.0			—			—			(29.9	)		(5.1	)		—		—
Dividends paid			(25.1	)		—			—			—			—			—		(25.1	)
Realized gain on derivatives			—			—			—			88.3			—			—		88.3
Other			(0.3	)		—			—			—			—			—		(0.3	)

Net cash (used in) provided by financing activities			10.6			961.5			—			(197.9	)		(816.6	)		—		(42.4	)

Cash flow from discontinued operations
Net cash used in operating activities			—			—			—			—			(7.9	)		—		(7.9	)

Net cash used in discontinued operations			—			—			—			—			(7.9	)		—		(7.9	)

Effect of exchange rates on cash and cash equivalents			(1.4	)		—			—			—			—			—		(1.4	)
Increase (decrease) in cash and cash equivalents			2.5			—			(0.4	)		287.9			(120.0	)		—		170.0
Cash and cash equivalents at beginning of period			9.9			—			1.2			0.4			170.1			—		181.6

Cash and cash equivalents at end of period		£	12.4		£	—		£	0.8		£	288.3		£	50.1		£	—	£	351.6

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 14—Condensed Consolidated Financial Information (Continued)

	Nine months ended September 30, 2008

Statement of cash flows	Company			Virgin Media Finance		Other guarantors			VMIH			All other subsidiaries			Adjustments		Total
	(Adjusted) (in millions)
Net cash provided by (used in) operating activities	£	2.6		£	—	£	(7.1	)	£	(35.1	)	£	637.1		£	—	£	597.5
Investing activities:
Purchase of fixed and intangible assets		—			—		—			—			(338.7	)		—		(338.7	)
Principal repayments on loans to equity investments		—			—		—			—			10.7			—		10.7
Principal (repayments) drawdowns on loans to group companies		(481.9	)		—		(2.6	)		267.6			216.9			—		—
Other		—			—		—			—			1.0			—		1.0

Net cash (used in) provided by investing activities		(481.9	)		—		(2.6	)		267.6			(110.1	)		—		(327.0	)

Financing activities:
New borrowings, net of financing activities		493.4			—		—			—			—			—		493.4
Proceeds from employee stock option excercises		0.6			—		—			—			—			—		0.6
Principal payments on long term debt and capital leases		—			—		—			(217.1	)		(316.1	)		—		(533.2	)
Intercompany funding movements		13.3			—		1.7			(15.0	)		—			—		—
Dividends paid		(20.4	)		—		—			—			—			—		(20.4	)

Net cash (used in) provided by financing activities		486.9			—		1.7			(232.1	)		(316.1	)		—		(59.6	)

Cash flow from discontinued operations
Net cash used in operating activities		—			—		—			—			(9.2	)		—		(9.2	)
Net cash used in investing activities		—			—		—			—			(1.8	)		—		(1.8	)

Net cash used in discontinued operations		—			—		—			—			(11.0	)		—		(11.0	)

Effect of exchange rates on cash and cash equivalents		0.1			—		—			—			—			—		0.1
Increase (decrease) in cash and cash equivalents		7.7			—		(8.0	)		0.4			199.9			—		200.0
Cash and cash equivalents at beginning of period		1.3			—		10.0			0.7			309.4			—		321.4

Cash and cash equivalents at end of period	£	9.0		£	—	£	2.0		£	1.1		£	509.3		£	—	£	521.4

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

			September 30, 2009			December 31, 2008

			(unaudited)
Assets
Current assets
	Cash and cash equivalents		£	338.4		£	170.7
	Restricted cash			5.3			5.3
	Accounts receivable—trade, less allowances for doubtful accounts of £13.0 (2009)
		and £16.5 (2008)		417.5			454.3
	Inventory			97.5			81.1
	Derivative financial instruments			0.3			168.4
	Prepaid expenses and other current assets			110.8			104.0
	Current assets held for sale			—			56.2

Total current assets				969.8			1,040.0
Fixed assets, net				4,974.0			5,209.3
Goodwill and other indefinite-lived assets				2,091.4			2,091.4
Intangible assets, net				327.2			510.3
Equity investments				355.3			353.5
Derivative financial instruments				266.7			435.7
Other assets, net of accumulated amortization of £118.3 (2009) and £78.0 (2008)				141.1			140.7
Due from group companies				801.1			795.0

Total assets			£	9,926.6		£	10,575.9

Liabilities and shareholders' equity
Current liabilities
	Accounts payable		£	307.1		£	370.0
	Accrued expenses and other current liabilities			413.2			443.4
	Derivative financial instruments			29.6			84.4
	VAT and employee taxes payable			57.7			57.4
	Restructuring liabilities			61.2			69.5
	Interest payable			69.0			95.9
	Interest payable to group companies			192.0			113.7
	Deferred revenue			283.1			259.4
	Current portion of long term debt			42.2			40.5
	Current liabilities held for sale			—			36.2

	Total current liabilities			1,455.1			1,570.4
Long term debt, net of current portion				3,257.0			4,327.6
Long term debt due to group companies				3,307.4			2,468.1
Derivative financial instruments				69.0			42.6
Deferred revenue and other long term liabilities				149.6			147.2
Deferred income taxes				82.8			79.2

Total liabilities				8,320.9			8,635.1

Commitments and contingent liabilities
Shareholders' equity
	Common stock—£0.001 par value; authorized 1,000,000 ordinary shares
		(2009 and 2008); issued and outstanding 224,552 ordinary shares
		(2009 and 2008)		—			—
	Additional paid-in capital			4,371.3			4,371.3
	Accumulated other comprehensive (loss) income			(60.2	)		9.0
	Accumulated deficit			(2,705.4	)		(2,439.5	)

	Total shareholders' equity			1,605.7			1,940.8

Total liabilities and shareholders' equity			£	9,926.6		£	10,575.9

See accompanying notes.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited) (in millions)

			Three months ended September 30,						Nine months ended September 30,

			2009			2008			2009			2008
						(Adjusted)						(Adjusted)
Revenue			£	926.7		£	912.8		£	2,743.0		£	2,745.2
Costs and expenses
	Operating costs (exclusive of depreciation shown separately below)			393.3			384.5			1,185.5			1,175.5
	Selling, general and administrative expenses			186.8			203.5			572.9			590.9
	Restructuring and other charges			1.6			0.1			29.5			2.9
	Depreciation			230.4			209.3			686.6			659.1
	Amortization			61.0			63.3			183.3			219.4
	Goodwill impairment			—			(4.0	)		—			362.2

				873.1			856.7			2,657.8			3,010.0

Operating income (loss)				53.6			56.1			85.2			(264.8	)
Other income (expense)
	Interest income and other, net			1.2			7.8			6.5			20.7
	Interest income from group companies			2.0			2.1			6.0			5.8
	Interest expense			(57.9	)		(88.5	)		(180.7	)		(278.2	)
	Interest expense to group companies			(66.6	)		(40.6	)		(164.1	)		(107.7	)
	Share of income from equity investments			5.1			2.1			7.2			11.1
	Foreign currency (losses) gains			(44.0	)		(103.0	)		117.1			(127.4	)
	Loss on extinguishment of debt			(9.4	)		—			(16.7	)		(5.6	)
	Gains (losses) on derivative instruments			43.6			48.0			(104.1	)		79.1

Loss from continuing operations before income taxes				(72.4	)		(116.0	)		(243.6	)		(667.0	)
	Income tax benefit (expense)			12.7			(1.5	)		0.5			12.0

		Loss from continuing operations		(59.7	)		(117.5	)		(243.1	)		(655.0	)

Discontinued operations
	Loss from discontinued operations, net of tax			—			(4.6	)		(22.8	)		(11.5	)

Net loss			£	(59.7	)	£	(122.1	)	£	(265.9	)	£	(666.5	)

See accompanying notes.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

			Nine months ended September 30,

			2009			2008
						(Adjusted)
Operating activities
Net loss			£	(265.9	)	£	(666.5	)
Income from discontinued operations				22.8			11.5

Loss from continuing operations				(243.1	)		(655.0	)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities
	Depreciation and amortization			869.9			878.5
	Goodwill impairment			—			362.2
	Non-cash interest			32.5			(31.5	)
	Non-cash compensation			9.4			10.0
	Income from equity accounted investments, net of dividends received			(5.5	)		(3.7	)
	Income taxes			2.2			(5.7	)
	Amortization of original issue discount and deferred finance costs			24.6			15.7
	Unrealized foreign currency (gains) losses			(131.8	)		36.6
	Loss on extinguishment of debt			15.8			5.6
	Unrealized losses (gains) on derivative instruments			113.9			(76.9	)
	Other			(1.0	)		(0.3	)
Changes in operating assets and liabilities				(79.3	)		(60.6	)

	Net cash provided by operating activities			607.6			474.9

Investing activities
	Purchase of fixed and intangible assets			(405.8	)		(331.8	)
	Principal repayments on loans to equity investments			8.9			10.7
	Disposal of sit-up, net			(17.5	)		—
	Investments in, and loans to, parent and subsidiary companies			961.5			589.8
	Other			0.4			1.0

	Net cash provided by investing activities			547.5			269.7

Financing activities
	Principal payments on long term debt and capital leases			(1,035.1	)		(533.2	)
	Financing fees			(32.7	)		—
	Realized gain on derivatives			88.3			—

	Net cash used in financing activities			(979.5	)		(533.2	)

Cash flow from discontinued operations
	Net cash used in operating activities			(7.9	)		(9.2	)
	Net cash used in investing activities			—			(1.8	)

		Net cash used in discontinued operations		(7.9	)		(11.0	)

Effect of exchange rate changes on cash and cash equivalents				—			—
Increase in cash and cash equivalents				167.7			200.4
Cash and cash equivalents, beginning of period				170.7			310.0

Cash and cash equivalents, end of period			£	338.4		£	510.4

See accompanying notes.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1—Basis of Presentation

Virgin Media Investment Holdings Limited, or VMIH, is an indirect, wholly owned subsidiary of Virgin Media Inc.

The 2008 financial information has been adjusted so the basis of presentation is consistent with that of the 2009 financial information. The adjustments reflect the financial condition and results of operations of our sit-up reporting unit as assets and liabilities held for sale and discontinued operations, respectively, in the periods presented.

Note 2—Discontinued Operations

On April 1, 2009, we completed the disposal of our sit-up reporting unit, which was formerly included within our Content segment. sit-up provided a variety of retail consumer products through three interactive auction- based television channels: price-drop tv, bid tv and speed auction tv.

We determined that the planned sale of the sit-up business met the requirements as of March 31, 2009 to be reflected as assets and liabilities held for sale and discontinued operations in both the current and prior periods and accordingly, we adjusted the balance sheet as of December 31, 2008 and statement of operations for the three and nine months ended September 30, 2008. Revenue of the sit-up business, reported in discontinued operations, for the three and nine months ended September 30, 2009 was nil and £38.9 million, respectively and for the three and nine months ended September 30, 2008 was £51.0 million and £157.2 million, respectively. sit-up's pre-tax loss, reported within discontinued operations, for the three and nine months ended September 30, 2009 was £nil and £22.8 million, respectively and for the three and nine months ended September 30, 2008 was £4.6 million and £11.5 million, respectively. We wrote down the assets held for sale to fair value at March 31, 2009, resulting in a £19.0 million impairment charge, which is included in the loss from discontinued operations for the nine months ended September 30, 2009.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 3—Long Term Debt

Long term debt consisted of (in millions):

		September 30, 2009			December 31, 2008

U.S. Dollar
	8.75% U.S. dollar senior loan notes due 2014*	£	265.6		£	290.7
	9.125% U.S. dollar senior notes due 2016*		343.7			376.2
	6.50% U.S. dollar loan notes due 2016**		462.5			164.1
	6.50% U.S. dollar loan notes due 2016*		150.5			507.0
	9.50% U.S. dollar senior notes due 2016*		818.5			—
	Floating rate senior loan notes due 2012*		62.5			68.4
	Senior credit facility		278.1			363.8
	Other loan notes due to affiliates		9.9			10.9
Euro
	8.75% euro senior loan notes due 2014*		205.7			214.2
	9.50% euro senior loan notes due 2016*		157.5			—
	Senior credit facility		367.6			403.7
	Other loan notes due to affiliates		105.5			111.1
Sterling
	9.75% sterling senior loan notes due 2014*		375.0			375.0
	Senior credit facility		2,481.1			3,421.9
	Other loan notes due to affiliates		350.5			350.5
	Capital leases		169.2			174.6
	Other		3.2			4.1

			6,606.6			6,836.2
	Less: current portion		(42.2	)		(40.5	)

		£	6,564.4		£	6,795.7

*: Due to Virgin Media Finance PLC
**: Due to Virgin Media (UK) Group Inc.

The effective interest rate on the senior credit facility was 5.3% and 7.3% as at September 30, 2009 and December 31, 2008, respectively.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 3—Long Term Debt (Continued)

Note 4—Fair Value Measurements

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).The inputs used to measure fair value are classified into the following hierarchy:



	Level 1		Unadjusted quoted prices in active markets for identical assets or liabilities
	Level 2		Unadjusted quoted prices in active markets for similar assets or liabilities, or
			Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
			Inputs other than quoted prices that are observable for the asset or liability
	Level 3		Unobservable inputs for the asset or liability

In estimating the fair value of our other financial instruments, we used the following methods and assumptions:

Long term debt: In the following table the fair value of our senior credit facility is based upon quoted trading prices in inactive markets for this debt, which incorporates non-performance risk, and is classified within level 2 of the fair value hierarchy. The fair values of our other debt in the following table are based on the quoted market prices in active markets for the underlying third party debt and incorporate non-performance risk. Accordingly, the inputs used to value these debt instruments are classified within level 1 of the fair value hierarchy.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 4—Fair Value Measurements (Continued)

The carrying amounts and fair values of our long term debt are as follows (in millions):

	September 30, 2009				December 31, 2008

	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior credit facility	£	3,126.8	£	2,989.3	£	4,189.4	£	3,048.0
8.75% U.S. dollar loan notes due 2014*		265.6		278.4		290.7		246.7
9.75% sterling loan notes due 2014*		375.0		390.0		375.0		292.5
8.75% euro loan notes due 2014*		205.7		219.6		214.2		158.8
9.125% U.S. dollar senior notes due 2016*		343.7		359.7		376.2		313.1
6.50% U.S. dollar loan notes due 2016*		150.5		160.0		507.0		226.1
6.50% U.S. dollar loan notes due 2016**		462.5		491.8		164.1		73.2
9.50% U.S. dollar senior notes due 2016*		818.5		908.6		—		—
9.50% euro senior loan notes due 2016*		157.5		182.7		—		—
Floating rate loan notes due 2012*		62.5		62.5		68.4		68.4
Other loan notes due to affiliates		465.9		465.9		472.5		472.5

*: Due to Virgin Media Finance PLC
**: Due to Virgin Media (UK) Group Inc.

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, trade receivables and derivative contracts.

At September 30, 2009 and December 31, 2008, we had £338.4 million and £170.7 million, respectively, in cash and cash equivalents. These cash and cash equivalents are on deposit with major financial institutions and, as part of our cash management process, we perform regular evaluations of the credit standing of these institutions using a range of metrics. We have not experienced any losses in cash balances and do not believe we are exposed to any significant credit risk on our cash balances.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Derivative Financial Instruments

Strategies and Objectives for Holding Derivative Instruments

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Derivative Financial Instruments (Continued)

The fair values of these derivative instruments recorded on our condensed consolidated balance sheets were as follows (in millions):

			September 30, 2009		December 31, 2008

Included within current assets:
	Accounting Hedge
		Foreign currency forward rate contracts	£	0.3	£	37.6
		Interest rate swaps		—		6.1
		Cross-currency interest rate swaps		—		61.5
	Economic Hedge
		Foreign currency forward rate contracts		—		63.2

			£	0.3	£	168.4

Included within non-current assets:
	Accounting Hedge
		Interest rate swaps	£	—	£	—
		Cross-currency interest rate swaps		80.9		136.1
	Economic Hedge
		Cross-currency interest rate swaps		185.8		299.6

			£	266.7	£	435.7

Included within current liabilities:
	Accounting Hedge
		Foreign currency forward rate contracts	£	0.4	£	—
		Interest rate swaps		21.7		2.2
	Economic Hedge
		Foreign currency forward rate contracts		3.3		79.6
		Interest rate swaps		4.2		2.6

			£	29.6	£	84.4

Included within non-current liabilities:
	Accounting Hedge
		Interest rate swaps	£	10.7	£	11.5
		Cross-currency interest rate swaps		33.8		—
	Economic Hedge
		Cross-currency interest rate swaps		24.5		31.1

			£	69.0	£	42.6

Cross-Currency Interest Rate Swaps—Hedging the Interest Payments of Senior Notes and Senior Credit Facility

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Derivative Financial Instruments (Continued)

The terms of our outstanding cross-currency interest rate swaps at September 30, 2009 were as follows:

Hedged item/Maturity date		Hedge type	Notional amount due from counterparty		Notional amount due to counterparty		Weighted average interest rate due from counterparty	Weighted average interest rate due to counterparty

			(in millions)		(in millions)
$425m senior notes due 2014 October 2011		Accounting	$	425.0	£	291.0	8.75%	9.53%
$550m senior notes due 2016 August 2016		Accounting		550.0		301.2	9.13%	8.54%
$1,350m senior notes due 2016 August 2016		Accounting		1,350.0		835.5	9.50%	9.98%
$1,000m senior notes due 2016 November 2016		Economic		1,000.0		505.6	6.50%	6.95%
Senior credit facility September 2012		Economic		445.1		241.5	3 month $ LIBOR + 2.00%	3 month £ LIBOR + 2.13%

			$	3,770.1	£	2,174.8

€225m senior notes due 2014 October 2011		Accounting	€	225.0	£	207.4	8.75%	8.90%
€180m senior notes due 2016 August 2016		Accounting		180.0		158.6	9.50%	10.18%
Senior credit facility September 2012		Economic		402.2		278.9	3 month EURIBOR + 2.00%	3 month LIBOR + 2.16%

			€	807.2	£	644.9

Other
	December 2012	Economic	€	56.7	£	40.3	3 month EURIBOR + 2.38%	3 month LIBOR + 2.69%
	December 2013	Economic		43.3		30.7	3 month EURIBOR + 2.88%	3 month LIBOR + 3.26%

			€	100.0	£	71.0

	December 2012	Economic	£	38.8	€	56.7	3 month LIBOR + 2.40%	3 month EURIBOR + 2.38%
	December 2013	Economic		29.7		43.3	3 month LIBOR + 2.90%	3 month EURIBOR + 2.88%

			£	68.5	€	100.0

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Derivative Financial Instruments (Continued)

Interest Rate Swaps—Hedging of Interest Rate Sensitive Obligations

The terms of our outstanding interest rate swap contracts at September 30, 2009 were as follows:

Hedged item/Maturity date		Hedge type	Notional amount		Weighted average interest rate due from counterparty

			(in millions)
Senior credit facility
	April 2010	Accounting		£2,400.0	3 month LIBOR	2.31%
	April 2010	Economic		600.0	3 month LIBOR	1.66%
	April 2010 to April 2011	Accounting		200.0	3 month LIBOR	2.58%
	April 2010 to September 2012	Accounting		1,300.0	3 month LIBOR	3.07%
	April 2010 to March 2013	Accounting		300.0	3 month LIBOR	3.28%

Foreign Currency Forward Rate Contracts—Hedging Committed and Forecasted Transactions

Hedged item/Maturity date		Hedge type	Notional amount due from counterparty	Notional amount due to counterparty	Weighted average exchange rate

			(in millions)	(in millions)
Commited and forecasted purchases
	October 2009 to June 2010	Economic	$66.9	£45.2	1.4811
	December 2009 to June 2010	Accounting	$8.5	£5.7	1.4810
	October 2009 to January 2010	Accounting	€1.0	£0.9	1.1250
	October 2009 to January 2010	Accounting	ZAR 16.4	£1.1	15.3587

Cash Flow Hedges

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Derivative Financial Instruments (Continued)

		Total			Interest rate swaps			Cross-currency interest rate swaps			Forward foreign exchange contracts			Tax Effect

		(in millions)
Balance at December 31, 2008		£	40.1		£	(7.9	)	£	64.0		£	—		£	(16.0	)
Amounts recognized in other comprehensive income			(30.6	)		(14.1	)		(16.9	)		0.4			—
Amounts reclassified to earnings impacting:
	Foreign exchange gain		(2.8	)		—			(2.8	)		—			—
	Interest expense		(2.1	)		2.0			(4.1	)		—			—
Tax effect recognized			9.9			—			—			—			9.9

Balance at March 31, 2009		£	14.5		£	(20.0	)	£	40.2		£	0.4		£	(6.1	)

Amounts recognized in other comprehensive income			(167.6	)		14.6			(181.3	)		(0.9	)		—
Amounts reclassified to earnings impacting:
	Foreign exchange loss		152.3			—			152.3			—			—
	Interest expense		5.0			4.6			0.4			—			—
	Operating costs		0.1			—			—			0.1			—
Tax effect recognized			2.9			—			—			—			2.9

Balance at June 30, 2009		£	7.2		£	(0.8	)	£	11.6		£	(0.4	)	£	(3.2	)

Amounts recognized in other comprehensive income			26.9			(38.4	)		65.1			0.2			—
Amounts reclassified to earnings impacting:
	Foreign exchange gain		(60.0	)		—			(60.0	)		—			—
	Interest expense		10.0			7.6			2.4			—			—
	Operating costs		0.2			—			—			0.2			—
Tax effect recognized			(12.8	)		—			—			—			(12.8	)

Balance at September 30, 2009		£	(28.5	)	£	(31.6	)	£	19.1		£	—		£	(16.0	)

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Restructuring and Other Charges

Restructuring and other charges of £1.6 million for the three months ended September 30, 2009 related primarily to lease exit costs in relation to our historic restructuring activities. Restructuring and other charges of £29.5 million for the nine months ended September 30, 2009 related primarily to employee termination and lease exit costs in connection with the restructuring program initiated in the last quarter of 2008 as discussed below. Restructuring and other charges of £0.1 million and £2.9 million for the three and nine months ended September 30, 2008 related mainly to lease exit and employee termination costs as a result of our acquisition-related restructuring programs net of revisions to previously accrued amounts.

The following tables summarize our historical restructuring accruals, the restructuring accruals resulting from the acquisitions made by us during 2006 and the accruals for the restructuring plan announced in 2008 by Virgin Media (in millions):

	Historical Restructuring Accruals			2006 Acquisition Restructuring Accruals			2008 Restructuring Accruals

Three months ended September 30, 2009	Lease Exit Costs			Lease Exit Costs			Involuntary Employee Termination and Related Costs			Lease and Contract Exit Costs			Total
Balance, June 30, 2009	£	14.4		£	30.9		£	12.7		£	12.6		£	70.6
Charged to expense		0.6			0.5			3.6			2.0			6.7
Revisions		0.5			(0.7	)		(4.2	)		(0.7	)		(5.1	)
Utilized		(0.8	)		(1.5	)		(7.3	)		(1.4	)		(11.0	)

Balance, September 30, 2009	£	14.7		£	29.2		£	4.8		£	12.5		£	61.2

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Restructuring and Other Charges (Continued)

	Historical Restructuring Accruals			2006 Acquisition Restructuring Accruals			2008 Restructuring Accruals

Nine months ended September 30, 2009	Lease Exit Costs			Lease Exit Costs			Involuntary Employee Termination and Related Costs			Lease and Contract Exit Costs			Total
Balance, December 31, 2008	£	16.0		£	38.1		£	1.9		£	13.5		£	69.5
Charged to expense		2.2			3.1			21.0			15.7			42.0
Revisions		(0.7	)		(6.9	)		(4.2	)		(0.7	)		(12.5	)
Utilized		(2.8	)		(5.1	)		(13.9	)		(16.0	)		(37.8	)

Balance, September 30, 2009	£	14.7		£	29.2		£	4.8		£	12.5		£	61.2

Note 7—Share Based Compensation

Stock Option Plans

We are an indirect, wholly owned subsidiary of Virgin Media. Accordingly, we have no stock-based compensation plans. As at September 30, 2009, certain of our employees participated in the stock-based compensation plans of Virgin Media, as described in Virgin Media's 2008 Annual Report.

Note 8—Comprehensive Loss

Comprehensive loss comprises (in millions):

	Three months ended September 30,						Nine months ended September 30,

	2009			2008			2009			2008
				(Adjusted)						(Adjusted)
Net loss for period	£	(59.7	)	£	(122.1	)	£	(265.9	)	£	(666.5	)
Currency translation adjustment		(0.1	)		—			(0.6	)		—
Net unrealized gains (losses) on derivatives, net of tax		41.8			18.5			(100.8	)		46.1
Reclassification of derivative (losses) gains to net income, net of tax		(77.5	)		(24.1	)		32.2			(35.7	)

Comprehensive loss	£	(95.5	)	£	(127.7	)	£	(335.1	)	£	(656.1	)

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 8—Comprehensive Loss (Continued)

The components of accumulated other comprehensive (loss) income, net of taxes, were as follows (in millions):

	September 30, 2009			December 31, 2008

Foreign currency translation	£	(0.2	)	£	0.4
Pension liability adjustments		(31.5	)		(31.5	)
Net unrealized gains on derivatives		(28.5	)		40.1

	£	(60.2	)	£	9.0

Note 9—Income Taxes

Our income tax (expense) benefit for the three and nine months ended September 30, 2009 and 2008 was as follows (in millions):

		Three months ended September 30,						Nine months ended September 30,

		2009			2008			2009			2008
Income tax (expense) benefit:
	Deferred federal taxes	£	(1.5	)	£	(0.4	)	£	(3.6	)	£	(2.7	)
	U.S. state and local tax		(0.1	)		—			(0.1	)		—
	U.K. current tax		1.5			1.1			4.2			3.6
	U.K. deferred tax		12.8			(2.2	)		—			11.1

Total tax		£	12.7		£	(1.5	)	£	0.5		£	12.0

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 9—Income Taxes (Continued)

asset valuation allowance as a result of a reduction in certain deferred tax liabilities relating to amounts recognized in the statement of other comprehensive income during the period.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense in the statements of operations.

Note 10—Related Party Transactions

Virgin Media Inc. and its consolidated subsidiaries

We are a wholly owned subsidiary of Virgin Media Inc. We charge Virgin Media Inc. and certain of its group companies for operating costs and selling, general and administrative expenses incurred by us on their behalf. The following information summarizes our significant related party transactions with Virgin Media Inc. and its group companies (in millions):

	Three months ended September 30,				Nine months ended September 30,

	2009		2008		2009		2008
Operating costs	£	10.5	£	13.9	£	36.5	£	39.9
Selling, general and administrative expenses		14.4		12.5		35.4		37.6

The above charges are recorded in operating costs and selling, general and administrative expenses and offset the respective costs incurred.

Note 11—Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board, or FASB, issued guidance relating to the FASB Accounting Standards Codification, or ASC, at ASC 105. Effective for interim or annual financial periods ending after September 15, 2009, the ASC will become the single official source of authoritative U.S. GAAP (other than guidance issued by the SEC), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force (EITF), and related literature. After September 15, 2009, only one level of authoritative U.S. GAAP will exist. All other literature will be considered non-authoritative. The ASC does not change U.S. GAAP; instead, it introduces a new structure that is organized in an easily accessible, user-friendly online research system. We have adopted the disclosure requirements of this guidance.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 11—Recent Accounting Pronouncements (Continued)

issued for fiscal years beginning after December 15, 2008. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Note 12—Contingent Liabilities

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Contingent Liabilities (Continued)

unpredictable, we believe that we have valid defenses with respect to legal matters pending against us. Nevertheless, it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies, or because of the diversion of management's attention and the creation of significant expenses.

Note 13—Industry Segments

Our reporting segments are based on our method of internal reporting along with the criteria used by our chief executive officer, who is our chief operating decision maker (CODM), to evaluate segment performance, the availability of separate financial information and overall materiality considerations. In the first quarter of 2009, we changed our operating segments. While VMIH has operating segments, consisting of Consumer, Business and Content, which are consistent with Virgin Media's operating segments, financial information is only prepared and reviewed by the CODM at the consolidated level. As such, there are no separable reportable segments for VMIH.

As a result of the business reorganization initiated in 2008, Virgin Media realigned its internal reporting structure and the related financial information used by management and the CODM. Virgin Media's operating structures have been revised to build a customer-focused organization able to respond effectively to rapid changes in the market, technology and consumer demands through Virgin Media's three customer-based segments: Consumer, Business and Content.

Virgin Media's Consumer segment, part of which was previously included within its Cable segment, is its primary segment, consisting of the distribution of television programming, broadband and fixed line telephone services to consumers on its cable network and, to a lesser extent, off its cable network. The Consumer segment also includes its former Mobile segment consisting of its mobile telephony and broadband business.

Virgin Media's Business segment, which was previously part of its Cable segment, comprises its operations carried out through ntl:Telewest Business, which provides a complete portfolio of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K.

Virgin Media operates its Content segment through Virgin Media TV, which supplies television programming to the U.K. pay-television broadcasting market.

The 2008 fiscal year amounts have been adjusted to conform to the current period presentation. Subsequent to the year end, Virgin Media's management performed an exercise to reallocate goodwill and other indefinite-lived intangible assets that had been previously recognized in its former Cable and Mobile reporting units to the Consumer and Business reporting units. As a result of this review, goodwill and indefinite-lived intangible assets totaling £1,825.2 million and £207.3 million were allocated to the Consumer and Business reporting units, respectively. Virgin Media also performed an interim impairment review of the goodwill related to the former Mobile reporting unit as at January 1, 2009 and concluded that the goodwill was not impaired. Goodwill and indefinite-lived intangible assets recognized in Virgin Media's Consumer and Business reporting units will be tested for impairment on an annual basis on October 1 of each year. As at June 30, 2009, Virgin Media performed its annual impairment review of goodwill recognized in the Content segment and concluded that the fair value of the reporting unit exceeded its carrying value.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 13—Industry Segments (Continued)

The following segment information is based on the consolidated results of Virgin Media for the three and nine month periods ended September 30, 2009 and 2008 (in millions):

	Three months ended September 30, 2009

	Consumer		Business		Content			Total
Revenue	£	776.1	£	143.3	£	34.0	��	£	953.4
Inter segment revenue		—		—		7.0			7.0
Segment contribution	£	466.4	£	86.3	£	(0.4	)	£	552.3

	Three months ended September 30, 2008

	Consumer		Business		Content			Total
Revenue	£	756.6	£	153.4	£	30.9		£	940.9
Inter segment revenue		—		0.1		6.4			6.5
Segment contribution	£	450.5	£	83.3	£	(3.6	)	£	530.2

	Nine months ended September 30, 2009

	Consumer		Business		Content		Total
Revenue	£	2,287.0	£	435.6	£	102.3	£	2,824.9
Inter segment revenue		—		—		20.2		20.2
Segment contribution	£	1,358.6	£	252.6	£	12.9	£	1,624.1

	Nine months ended September 30, 2008

	Consumer		Business		Content		Total
Revenue	£	2,269.8	£	470.9	£	87.6	£	2,828.3
Inter segment revenue		—		0.3		19.2		19.5
Segment contribution	£	1,357.3	£	248.8	£	0.3	£	1,606.4

Revenue in the table above includes £26.7 million and £81.9 million for the three and nine months ended September 30, 2009, respectively, related to companies that are not consolidated in VMIH. Revenue in the table above includes £28.1 million and £83.1 million for the three and nine months

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 13—Industry Segments (Continued)

ended September 30, 2008, respectively, related to companies that are not consolidated in VMIH. The reconciliation of total segment contribution to our consolidated operating income is as follows (in millions):

		Three months ended September 30,						Nine months ended September 30,

		2009			2008			2009			2008
Total segment contribution		£	552.3		£	530.2		£	1,624.1		£	1,606.4
	Other operating and corporate costs		203.9			203.9			629.6			622.3
	Depreciation		235.6			213.7			702.2			674.2
	Amortization		61.0			63.3			183.3			221.7
	Operating loss of companies not consolidated in VMIH		(3.4	)		(2.8	)		(6.8	)		(12.1	)
	Restructuring and other charges		1.6			—			30.6			2.9
	Goodwill impairment		—			(4.0	)		—			362.2

Consolidated operating income (loss)		£	53.6		£	56.1		£	85.2		£	(264.8	)

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes that appear elsewhere in this document.

Overview

We are a leading U.K. entertainment and communications business providing a "quad-play" offering of broadband, television, mobile telephone, and fixed line telephone services, together with one of the most advanced television on-demand services available in the U.K. market. We are one of the U.K.'s largest residential broadband providers and mobile virtual network operators, and the second largest provider of pay television and fixed line telephone services by number of customers. Through our ntl:Telewest Business unit we provide a complete portfolio of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K. We also provide a broad range of programming through Virgin Media Television, or Virgin Media TV, which operates our wholly owned channels, such as Virgin1, Living and Bravo and through UKTV, our joint ventures with BBC Worldwide.

On April 1, 2009, we sold our sit-up reporting unit. sit-up operated a portfolio of auction-based retail television channels and was formerly included within our Content segment.

Our previously reported operating segments, Cable, Mobile and Content, were based on the method by which we distributed our services. As a result of the business reorganization initiated in 2008, we have realigned our internal reporting structure and the related financial information used by our chief operating decision maker to assess the performance of our business. Our new operating segments are as follows:

•: Consumer: our Consumer segment, part of which was previously included within our Cable segment, includes the distribution of television programming over our cable network and the provision of broadband and fixed line telephone services to residential consumers, both on our cable network and to a lesser extent off our network. Our new Consumer segment also includes our former Mobile segment which is operated through Virgin Mobile, and consists of our mobile telephony and broadband business;
•: Business: our Business segment, which was previously included within our Cable segment, includes the voice and data telecommunication and internet solutions services we provide through ntl:Telewest Business to businesses, public sector organizations and service providers; and
•: Content: our Content segment includes the operations of our wholly owned television channels, such as Virgin1, Living and Bravo. Although not included in our Content segment revenue, our content management team also oversees our interest in the UKTV television channels through our joint ventures with BBC Worldwide.

Our revenue by segment for the nine months ended September 30, 2009 and 2008 was as follows (in millions):

	Nine months ended September 30,

	2009				2008
Consumer Segment	£	2,287.0	81.0	%	£	2,269.8	80.3	%
Business Segment		435.6	15.4			470.9	16.6
Content Segment		102.3	3.6			87.6	3.1

	£	2,824.9	100.0	%	£	2,828.3	100.0	%

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For further discussion of our business, please refer to our 2008 Annual Report.

Recent Developments

On October 1, 2009, our common stock was admitted to the Official List of the Financial Services Authority and commenced secondary trading on the main market of the London Stock Exchange under the ticker symbol "VMED". We did not issue any new common shares in connection with our London listing. The primary listing for the shares of our common stock will continue to be the NASDAQ Global Select Market.

On October 16, 2009, we announced that we were seeking the consent of our senior lenders to make certain amendments to our senior credit facility to provide additional financial flexibility, including the ability to issue senior secured bonds which would rank pari passu with the obligations under our senior credit facility and up-dating the hedging related provisions in the intercreditor agreements to bring them in line with current market standard and hedge counterparty expectations. See "Liquidity and Capital Resources—Senior Credit Facility" below for a more detailed description of our senior credit facility.

Factors Affecting Our Business

A number of factors affect the performance of our business, at both a general and segment level.

General

Factors that affect all of the segments in which we operate are as follows:

General Macroeconomic Factors. General macroeconomic factors in the U.K. have an impact on our business. For example, during an economic slowdown, potential and existing customers may be less willing, or able to purchase our products or upgrade their services. We may also experience increased churn and higher bad debt expense. In addition, as expenditures by advertisers are sensitive to economic conditions and tend to decline in recessionary periods and other periods of uncertainty, we have experienced a decrease in advertising revenues generated through our television programming and broadband internet platforms, except to the extent offset by an increase in our share of the advertising market.

Currency Movements. We encounter currency exchange rate risks because substantially all of our revenue and operating costs are earned and paid primarily in U.K. pounds sterling, but we pay interest and principal obligations with respect to a portion of our existing indebtedness in U.S. dollars and euros. We have in place hedging programs that seek to mitigate the risk from these exposures. While the objective of these programs is to reduce the volatility of our cash flows and earnings caused by changes in underlying currency exchange rates, not all of our exposures are hedged, and not all of our hedges are designated as such for accounting purposes. Additionally, we do not hedge the principal portion of our convertible senior notes. We also purchase goods and services in U.S. dollars, euros and South African rand, such as TV programming, customer premise equipment and network maintenance services and some of these exposures are not hedged.

Integration and Restructuring Activities. In the fourth quarter of 2008, we commenced the implementation of a restructuring plan aimed at driving further improvements in our operational performance and eliminating inefficiencies in order to create a fully-integrated, customer-focused organization. While we anticipate significant cost savings from the plan and that the annual savings from and after 2010 will exceed the annual costs, we expect that 2009 costs will be at a similar level to 2009 savings. These costs will include purchases of fixed assets, lease and contract exit costs, employee termination costs and other restructuring and restructuring-related expenses, some of which will be classified as restructuring costs. In total, we expect to incur operating expenditures of between £

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120 million to £140 million and capital expenditures of between £50 million to £60 million in connection with this plan over a three-year period. Our financial performance may be negatively affected if we are unable to implement our restructuring plan successfully and realize the anticipated benefits.

Capital Expenditures. Our business requires substantial capital expenditures on a continuing basis for various purposes, including expanding, maintaining and upgrading our cable network, investing in new customer acquisitions, and offering new services. If we do not continue to invest in our network and in new technologies, our ability to retain and acquire customers may be hindered. Therefore, our liquidity and the availability of cash to fund capital projects are important drivers of our revenue. When our liquidity is restricted, so is our ability to meet our capital expenditure requirements.

Consumer Segment

In our Consumer segment, on-net customers account for the majority of our revenue. The number of customers, the number and types of services that each customer uses and the prices we charge for these services drive our revenue. Our profit is driven by the relative margins on the types of services we provide to these customers and by the number of services that we provide to them and, with respect to our fixed and mobile telephone customers, by usage levels of our services. For example, on-net broadband internet is more profitable than our television services and, on average, our "triple-play" customers are more profitable than "double-play" or "single-play" customers. Similarly, over the service term our contract mobile customers are more profitable than our prepay mobile customers, and provide a better opportunity for cross-sell of our on-net products. We actively promote "quad-play" services and our packaging of services and our pricing are designed to encourage our customers to use multiple services such as television, fixed and mobile telephone and broadband at a lower price than each stand-alone product on a combined basis. Factors particularly affecting our Consumer segment include average revenue per user, or ARPU, churn, competition, seasonality and distribution.

On-net ARPU. On-net ARPU is a measure we use to evaluate how effectively we are realizing potential revenue from our residential customers on our cable network. We believe that our "triple-play" cable offering of television, broadband and fixed line telephone services is attractive to our existing cable customer base and generally allows us to increase our on-net ARPU by facilitating the sale of multiple services to each customer. On-net ARPU excludes any revenue from our Mobile customers.

Mobile ARPU. Mobile ARPU is a measure we use to evaluate how effectively we are realizing revenue from our mobile customers. The mix of prepay and contract customers and level of usage have a material impact on Mobile ARPU. The mix of our customer base is changing as we focus on acquiring higher lifetime value contract customers, particularly through cross-selling to our on-net customer base, rather than lower lifetime value prepay customers. Consequently, the number of prepay customers is expected to decline in 2009, along with prepay usage.

Churn. Churn is a measure of the number of customers who stop subscribing to any of our services. An increase in our churn can lead to increased costs and reduced revenue. We continue to focus on improving our customer service and enhancing and expanding our service offerings to existing customers in order to manage our churn rates. Our ability to reduce our churn rates beyond a base level is limited by factors such as competition, the economy and, in respect of our on-net consumer business, customers moving outside our network service area, in particular during the summer season. Managing our churn rates is a significant component of our business plan. Our churn rates may increase if our customer service is seen as unsatisfactory, if we are unable to deliver any of our services without interruption, if we fail to match offerings by our competitors, if we increase our prices, if there is an improvement in the U.K. housing market or if there is a prolonged economic downturn.

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Competition. Our ability to acquire and retain customers and increase revenue depends on our competitive strength. There is significant and increasing competition in the market for our consumer services, including broadband and telephone services offered by British Telecom, or BT; resellers or local loop unbundlers, such as British Sky Broadcasting Group plc, or BSkyB, and Carphone Warehouse (Talk Talk); alternative internet access services like DSL; satellite television services offered by BSkyB and by BBC and ITV through Freesat; free-to-air digital terrestrial television offered through Freeview; internet protocol television offered by BT; and mobile telephone, television and data services offered by other mobile telephone operators including O₂, Vodafone, Orange, T-Mobile and 3, and from other mobile virtual network operators, including Tesco Mobile, BT Mobile and Carphone Warehouse. In addition, certain competitors, such as BT, BSkyB and large mobile network operators are dominant in markets in which we compete and may use their dominance in those markets to offer bundled services that compete with our product offerings. As a result of increased competition, we have had to, and may be required to continue to, adjust our pricing and offer discounts to new and existing customers in order to attract and retain customers.

Seasonality. Some of our Consumer revenue streams are subject to seasonal factors. For example, telephone usage revenue by residential customers tends to be slightly lower during summer holiday months. In the fourth quarter of each year, our mobile customer acquisition and retention costs typically increase due to the Christmas holiday period. Our Mobile ARPU generally decreases in the first quarter of each year due to the fewer number of days in February and lower usage after the Christmas holiday period. Our on-net churn rates include persons who disconnect their service because of moves, resulting in a seasonal increase in our churn rates during the summer months when higher levels of U.K. house moves occur and students leave their accommodation between academic years.

Distribution. We primarily rely upon third parties to distribute our mobile products and services. If any of these distribution partners were to cease to act as distributors for our products and services, or the commissions or other costs charged by the third parties were to increase, our ability to gain new mobile customers or retain existing customers may be adversely affected. We also distribute our products through our own retail outlets.

Business Segment

Factors particularly affecting our Business segment include competition, pricing and operational effectiveness.

Competition. Our ability to acquire and retain business customers and increase revenue depends on our competitive strength. There is significant and increasing competition in the market for our business services, including data and voice services offered by BT, Cable & Wireless plc, virtual network operators and systems integrators. While BT represents the main competitive threat nationally due to its network reach and product portfolio, other providers compete within product and geographic segments. Other providers, such as Kingston Communications (Hull) plc and COLT Telecom Group plc, compete with us in specific regions.

Pricing. Competition in the U.K. business telecommunications market continues to be based on value for money, the key components of which are quality, reliability and price. Particularly, in the current challenging economic conditions, price is becoming an increasingly important factor. Certain of BT's product pricing is regulated by the U.K. Office of Communications, however, in respect of non-regulated product pricing, the market is increasingly price sensitive.

Operational Effectiveness. Because of the extensive use of optical fiber in our access networks, we are also able to provide high-speed ethernet services directly to business customers and provide nationwide area networking to these customers via our core networks. Business customers require timely installation services and our ability to meet required timescales and commence providing services

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may impact our revenues. We regularly rely on third party suppliers to connect business customers and we have a variety of alternative methods to connect our national telecommunications network to the premises of business customers that are located outside of our cabled areas.

Content Segment

Factors particularly affecting our Content segment include competition, the number of buyers for our television channels across limited distribution platforms, our access to content, seasonality and advertising revenue.

Competition. Our television channels compete with other broadcasters for advertising revenues, subscription revenues and programming rights. IDS, our advertising sales department, competes with advertising sales operations representing other television broadcasters.

Limited Number of Buyers and Distribution Platforms. All of our channels are carried on our cable platform and on the satellite platform owned by BSkyB. A few of our channels are also carried on the free-to-air digital terrestrial television platform known as Freeview. Therefore, the principal third-party buyer of our television channels is BSkyB. Other than BSkyB, there are no significant buyers of our television channels.

Access to Content. Most of the television content on the Virgin Media TV channels is purchased, mainly from the U.S., and because there is a limited supply of content available and an increasing number of digital channels in the U.K., Virgin Media TV has experienced and may continue to experience an increase in the cost of its imported programming. Exchange rate movements have also resulted in increased programming costs and may continue to do so.

Seasonality. Our Content segment incurs increased costs in the fourth quarter of each year due to the need to provide enhanced programming over the important Christmas holiday period.

Advertising Revenue. The majority of revenue for Virgin Media TV is from advertisers. Consequently, Virgin Media TV's revenue is directly affected by changes in the total spend on television advertising in the U.K., including changes related to a sustained economic downturn, the viewing levels for its channels and the proportion of the U.K. advertising market represented by IDS.

Critical Accounting Policies

The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and contingent liabilities. We base our judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our consolidated financial statements, please refer to our 2008 Annual Report.

Consolidated Results of Operations

Consolidated Results of Operations for the Three Months and Nine Months Ended September 30, 2009 and 2008

Revenue

For the three months ended September 30, 2009, revenue increased by 1.3% to £953.4 million from £940.9 million for the three months ended September 30, 2008. Increases in revenue recognized in

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our Consumer and Content segments were partially offset by a decline in revenue in our Business segment, as more fully described in the segment discussions below. For the nine months ended September 30, 2009, revenue was relatively unchanged at £2,824.9 million as compared to £2,828.3 million for the nine months ended September 30, 2008. A decline in revenue in our Business segment was offset by increases in revenue in our Consumer and Content segments. For a detailed discussion of our various sources of revenue, see the segment discussions below.

Operating costs

Operating costs for the three months and nine months ended September 30, 2009 and 2008 were as follows (in millions):

		Three months ended September 30,							Nine months ended September 30,

		Three months ended September 30,				Increase/ (Decrease)			Nine months ended September 30,				Increase/ (Decrease)
		2009		2008		Increase/ (Decrease)			2009		2008		Increase/ (Decrease)
Operating costs:
	Consumer cost of sales	£	231.5	£	226.7		2.1	%	£	701.1	£	687.1		2.0	%
	Business cost of sales		40.6		52.4		(22.5	)		138.0		172.3		(19.9	)
	Content cost of sales		32.4		31.2		3.8			82.3		78.8		4.4
	Network and other operating costs		99.3		88.2		12.6			300.7		277.3		8.4

Total operating costs		£	403.8	£	398.5		1.3	%	£	1,222.1	£	1,215.5		0.5	%

For the three months ended September 30, 2009, operating costs increased by 1.3% to £403.8 million from £398.5 million during the same period in 2008. This increase was primarily attributable to increases in network and other operating costs, Consumer cost of sales and Content cost of sales, partially offset by decreased Business cost of sales. Network and other operating costs increased mainly due to higher power and other facility operating costs. Consumer cost of sales increased primarily as a result of higher carriage costs in relation to the BSkyB channels along with higher costs relating to subscriber equipment offset by lower interconnect costs from lower fixed line telephony usage. Business cost of sales decreased mainly due to the completion of the Heathrow Terminal 5 contract and lower interconnect costs due to lower voice traffic. Operating costs as a percentage of revenue remained stable at 42.4% for the three months ended September 30, 2009 and 2008.

For the nine months ended September 30, 2009, operating costs were relatively unchanged at £1,222.1 million as compared to £1,215.5 million during the same period in 2008. A decline in Business cost of sales was offset by increases in Consumer and Content cost of sales along with higher network and other operating costs. Business cost of sales declined mainly as a result of the completion of the Heathrow Terminal 5 contract and lower interconnect costs due to lower voice traffic. Consumer cost of sales increased primarily as a result of higher carriage costs in relation to the BSkyB channels along with higher costs relating to subscriber equipment offset by lower interconnect costs from lower fixed line telephony usage. Content cost of sales increased due to seasonally higher programming costs and higher programming costs from U.S. based content providers resulting from exchange rate movements. Network and other operating costs increased mainly due to higher power and other facility operating costs. Operating costs as a percentage of revenue were relatively stable at 43.3% for the nine months ended September 30, 2009 as compared to 43.0% for the same period in 2008.

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Selling, general and administrative expense

Selling, general and administrative expense for the three months and nine months ended September 30, 2009 and 2008 were as follows (in millions):

		Three months ended September 30,							Nine months ended September 30,

		Three months ended September 30,				Increase/ (Decrease)			Nine months ended September 30,				Increase/ (Decrease)
		2009		2008		Increase/ (Decrease)			2009		2008		Increase/ (Decrease)
Selling, general and administrative expenses:
	Employee and outsourcing costs	£	113.3	£	119.7		(5.3	)%	£	337.2	£	344.3		(2.1	)%
	Marketing costs		36.1		36.2		—			100.0		98.8		1.2
	Facilities		17.5		18.1		(3.3	)		56.0		57.6		(2.8	)
	Other		34.3		42.1		(18.5	)		115.1		128.0		(10.1	)

Total selling, general and administrative expenses		£	201.2	£	216.1		(6.9	)%	£	608.3	£	628.7		(3.2	)%

For the three months ended September 30, 2009, selling, general and administrative expenses decreased by 6.9% to £201.2 million from £216.1 million for the three months ended September 30, 2008. This decrease was primarily attributable to lower employee and outsourcing costs along with lower other costs. The reduction in employee and outsourcing costs was primarily a result of lower headcount and the reduction in other costs mainly related to savings in IT costs. Other costs includes billings, collections and bad debt expenses, IT costs, legal and professional fees, licenses, insurance and other indirect costs.

For the nine months ended September 30, 2009, selling, general and administrative expenses decreased by 3.2% to £608.3 million from £628.7 million for the nine months ended September 30, 2008. This decline was primarily attributable to a reduction in other costs, mainly in relation to savings in IT costs.

Restructuring and other charges

Restructuring and other charges comprised of £1.6 million in the three months ended September 30, 2009 which included £0.6 million in respect to involuntary employee termination costs and lease exit costs in connection with the restructuring program initiated in the fourth quarter of 2008. Restructuring and other charges were £nil in the three months ended September 30, 2008.

Restructuring and other charges of £30.6 million in the nine months ended September 30, 2009, comprised mainly of £32.7 million in respect to involuntary employee termination costs and lease exit costs in connection with the restructuring program initiated in the fourth quarter of 2008, offset by a £2.1 million reduction in the accruals for lease exit costs in connection with our historical and acquisition restructuring programs. Restructuring and other charges of £2.9 million in the nine months ended September 30, 2008 related primarily to an increase in our accrual for the lease exit costs in relation to changes in U.K. property tax rates partially offset by decreases as a result of the surrender or sublease of a number of properties.

Depreciation expense

For the three months ended September 30, 2009, depreciation expense increased by 10.2% to £235.6 million from £213.7 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, depreciation expense increased by 4.2% to £702.2 million from £674.2 million for the nine months ended September 30, 2008. The increase in depreciation expense in

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both periods was primarily a result of increases in depreciation in respect of new fixed assets partially offset by fixed assets becoming fully depreciated.

Amortization expense

For the three months ended September 30, 2009, amortization expense decreased to £61.0 million from £63.3 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, amortization expense decreased to £183.3 million from £221.7 million for the nine months ended September 30, 2008. The decline in amortization expense in both periods was primarily attributable to the cessation of amortization of certain intangible assets that became fully amortized in 2008.

Goodwill impairment

We performed our annual impairment review of our Content reporting unit as at June 30, 2009. As a result of this review we concluded that no impairment charge was required as at June 30, 2009.

In our June 30, 2008 impairment review for our former Mobile and Virgin Media TV reporting units we concluded that the fair value of our former Virgin Media TV reporting unit exceeded its carrying value, while the former Mobile reporting unit's fair value was less than its carrying value.

The fair value of the former Mobile reporting unit was determined through the use of a combination of both market and income valuation approaches to calculate fair value. The market approach valuations in respect of the former Mobile reporting unit declined from the prior year primarily as a result of declining market multiples of comparable companies. The income approach valuations in respect of the former Mobile reporting unit declined as a result of a combination of an increased discount rate, a reduced terminal value multiple and reduced long term cash flow estimates. We recorded a preliminary impairment charge of £366.2 million in the three and six months ended June 30, 2008. Following the completion of our valuation of the individual assets and liabilities within the former Mobile reporting unit during the third quarter of 2008, we recognized a reduction in the goodwill impairment charge of £4.0 million in the three months ended September 30, 2008. Consequently, the goodwill impairment charge for the nine months ended September 30, 2008 relating to our former Mobile reporting unit was £362.2 million.

Interest income and other, net

For the three months and nine months ended September 30, 2009, interest income and other decreased to £1.3 million and £6.6 million, respectively, from £7.8 million and £20.9 million, respectively, for the three months and nine months ended September 30, 2008, as a result of lower interest rates throughout the period.

Interest expense

For the three months ended September 30, 2009, interest expense decreased to £119.9 million from £124.6 million for the three months ended September 30, 2008, primarily as a result of lower interest rates and a lower debt balance following the prepayments made in 2008. We paid cash interest of £24.9 million for the three months ended September 30, 2009 and £86.2 million for the three months ended September 30, 2008. The decrease in cash interest payments was primarily due to differences in the timing of interest payments on our senior credit facility, together with lower interest rates and debt balances as described above.

For the nine months ended September 30, 2009, interest expense decreased to £331.2 million from £371.3 million for the nine months ended September 30, 2008, primarily as a result of lower interest rates and a lower debt balance following the prepayments made in 2008. We paid cash interest of £

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253.2 million for the nine months ended September 30, 2009 and £349.7 million for the nine months ended September 30, 2008. The decrease in cash interest payments was primarily due to differences in the timing of interest payments on our senior credit facility, together with lower interest rates and debt balances as described above.

Foreign currency (losses) gains

The foreign currency losses of £45.8 million in the three months ended September 30, 2009 were primarily due to the strengthening of the U.S. dollar and euro relative to the pound sterling and related remeasurement losses on the convertible senior notes and the U.S. dollar and euro denominated tranches of the senior credit facility. The foreign currency gains of £116.8 million in the nine months ended September 30, 2009 were primarily due to the strengthening of the pound sterling which occurred in the first six months of the year relative to the U.S. dollar and euro and related remeasurement gains on the convertible senior notes which is unhedged and the U.S. dollar and euro denominated tranches of the senior credit facility.

The foreign currency losses of £104.7 million in the three months ended September 30, 2008 were largely comprised of unrealized exchange losses on our U.S. dollar denominated debt, including the principal portion of our U.S. dollar denominated convertible senior notes which is unhedged. The foreign currency losses of £129.7 million in the nine months ended September 30, 2008 were largely comprised of unrealized losses resulting from unfavorable exchange rate movements on our U.S. dollar denominated debt, including the principal portion of our U.S. dollar denominated convertible senior notes which is unhedged.

Loss on extinguishment of debt

The loss on extinguishment of debt of £9.4 million in the three months ended September 30, 2009 related to the write-off of deferred financing costs resulting from repayments of our senior credit facility.

The loss on extinguishment of debt of £16.7 million in the nine months ended September 30, 2009 and £5.6 million in the nine months ended September 30, 2008 related to the write-off of deferred financing costs resulting from repayments of our senior credit facility.

Gains (losses) on derivative instruments

The gains on derivative instruments of £43.6 million in the three months ended September 30, 2009 were mainly driven by the pound sterling weakening against the U.S. dollar and euro in the quarter, which resulted in an increase in the fair value of U.S. dollar and euro denominated cross-currency interest rate swaps not designated as hedges for accounting purposes. The gains on derivative instruments of £48.0 million in the three months ended September 30, 2008 mainly related to the recognition of favorable mark to market changes in the U.S. dollar denominated cross currency interest rate swaps which are not designated as accounting hedges.

The losses on derivative instruments of £104.1 million in the nine months ended September 30, 2009 were mainly driven by the U.S. dollar and euro weakening against the pound sterling in the first six months of the year, which resulted in a reduction in the fair value of U.S. dollar and euro denominated cross-currency interest rate swaps not designated as hedges for accounting purposes. The gains on derivative instruments of £79.1 million in the nine months ended September 30, 2008 mainly related to the recognition of favorable mark to market changes in the valuation of U.S. dollar denominated derivative instruments that are not designated as accounting hedges.

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Income tax benefit

Our income tax benefit for the three and nine months ended September 30, 2009 and 2008 was as follows (in millions):

		Three months ended September 30,						Nine months ended September 30,

		2009			2008			2009			2008
Income tax (expense) benefit:
	Current federal taxes	£	2.1		£	0.2		£	1.9		£	(0.2	)
	U.S. state and local tax		(0.1	)		(0.1	)		(0.1	)		(0.1	)
	Deferred federal taxes		(1.5	)		1.0			(3.6	)		(6.5	)
	U.K. current tax		1.5			1.1			4.2			3.6
	U.K. deferred tax		12.8			(2.2	)		—			11.1

Total tax		£	14.8		£	—		£	2.4		£	7.9

Net loss from continuing operations

For the three months ended September 30, 2009, net loss from continuing operations decreased to £60.1 million compared with a net loss of £118.1 million for the same period in 2008 due to the factors discussed above. For the nine months ended September 30, 2009, net loss from continuing operations decreased to £240.6 million compared with a net loss of £664.5 million for the same period in 2008 due to the factors discussed above.

Loss from discontinued operations

For the three months ended September 30, 2009, net loss from discontinued operations was £nil compared with a loss of £4.6 million for the same period in 2008.

For the nine months ended September 30, 2009, net loss from discontinued operations was £22.8 million compared with a loss of £11.5 million for the same period in 2008. Included in the loss for the nine months ended September 30, 2009 is an impairment loss of £19.0 million in respect to assets held for sale related to the sit-up business.

Net loss from continuing operations per share

Basic and diluted net loss from continuing operations per common share for the three months ended September 30, 2009 was £0.18 compared to £0.36 for the three months ended September 30, 2008. Basic and diluted net loss from continuing operations per share is computed using a weighted average of 329.0 million shares issued in the three months ended September 30, 2009 and a weighted average of 328.1 million shares issued for the same period in 2008. Options, warrants, shares issuable under the convertible senior notes and shares of restricted stock held in escrow outstanding at September 30, 2009 and 2008 are excluded from the calculation of diluted net loss from continuing operations per share, since the securities are anti-dilutive.

Basic and diluted net loss from continuing operations per common share for the nine months ended September 30, 2009 was £0.73 compared to £2.03 for the nine months ended September 30, 2008. Basic and diluted net loss from continuing operations per share is computed using a weighted

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average of 328.6 million shares issued in the nine months ended September 30, 2009 and a weighted average of 328.1 million shares issued for the same period in 2008. Options, warrants, shares issuable under the convertible senior notes and shares of restricted stock held in escrow outstanding at September 30, 2009 and 2008 are excluded from the calculation of diluted net loss from continuing operations per share, since the securities are anti-dilutive.

Segmental Results of Operations from Continuing Operations for the Three Months and Nine Months Ended September 30, 2009 and 2008

A description of the products and services, as well as financial data, for each segment can be found in note 13 to Virgin Media's condensed consolidated financial statements.

The reportable segments disclosed in this quarterly report on Form 10-Q are based on our management organizational structure as of September 30, 2009. Future changes to this organizational structure may result in changes to the reportable segments disclosed.

Segment contribution, which is operating income (loss) before network operating costs, corporate costs, depreciation, amortization, goodwill and intangible asset impairments and restructuring and other charges, is management's measure of segment profit. Segment contribution excludes the impact of certain costs and expenses that are not directly attributable to the reporting segments, such as the costs of operating the network, corporate costs, depreciation and amortization. Restructuring and other charges, and goodwill and intangible asset impairments, are excluded from segment contribution as management believes they are not characteristic of our underlying business operations. Assets are reviewed on a consolidated basis and are not allocated to segments for management reporting since the primary asset of the business is the cable network infrastructure which is shared by our Consumer and Business segments.

Consumer Segment

The summary combined results of operations of our Consumer segment for the three months and nine months ended September 30, 2009 and 2008 were as follows (in millions):

	Three months ended September 30,				Nine months ended September 30,

	2009		2008		2009		2008
Revenue	£	776.1	£	756.6	£	2,287.0	£	2,269.8
Segment contribution		466.4		450.5		1,358.6		1,357.3

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Revenue

Our Consumer segment revenue for the three months and nine months ended September 30, 2009 and 2008 was as follows (in millions):

		Three months ended September 30,							Nine months ended September 30,

		Three months ended September 30,				Increase/ (Decrease)			Nine months ended September 30,				Increase/ (Decrease)
		2009		2008		Increase/ (Decrease)			2009		2008		Increase/ (Decrease)
Revenue:
	On-net	£	627.6	£	596.2		5.3	%	£	1,848.4	£	1,793.2		3.1	%
	Mobile(1)		134.1		145.5		(7.8	)		396.9		428.9		(7.5	)
	Off-net		14.4		14.9		(3.4	)		41.7		47.7		(12.6	)

Total revenue		£	776.1	£	756.6		2.6	%	£	2,287.0	£	2,269.8		0.8	%

(1): Includes equipment revenue stated net of discounts earned through service usage.

For the three months ended September 30, 2009, on-net revenue increased to £627.6 million from £596.2 million for the three months ended September 30, 2008, and for the nine months ended September 30, 2009, on-net revenue increased to £1,848.4 million from £1,793.2 million for the nine months ended September 30, 2008. The increases for both the three and nine month periods were primarily due to selective price rises together with the combined effect of on-net Revenue Generating Unit, or on-net RGU, growth and broadband tier mix improvement. This was partially offset by continued decline in fixed line telephone usage and increased promotional discounting. As a result of the increases in on-net revenue, on-net ARPU increased to £44.24 for the three months ended September 30, 2009 from £42.00 for the three months ended September 30, 2008.

Our focus on acquiring new bundled customers and on cross-selling to existing customers is demonstrated by on-net RGUs per customer increasing to 2.45 at September 30, 2009 from 2.38 at September 30, 2008, and by triple-play penetration growing to 59.5% at September 30, 2009 from 54.7% at September 30, 2008. A triple-play customer is a customer who subscribes to our on-net television, broadband and fixed line telephone services.

For the three months ended September 30, 2009, mobile revenue decreased to £134.1 million from £145.5 million for the three months ended September 30, 2008, and for the nine months ended September 30, 2009, mobile revenue decreased to £396.9 million from £428.9 million for the nine months ended September 30, 2008. The decreases for both the three month and nine month periods were primarily attributable to lower revenue from a reduction in prepay subscribers, partially offset by revenue growth from an increase in the number of contract subscribers with call usage revenues declining overall. Mobile revenue was also adversely impacted by lower mobile termination rates that came into force following regulatory changes in April 2009, as a result of which the revenue generated by certain call types through our mobile services was reduced. The change in regulated mobile termination rates also resulted in lower interconnect costs within our Consumer and Business segments. Mobile ARPU decreased to £13.41 for the three months ended September 30, 2009 from £13.60 for the three months ended September 30, 2008 mainly due to declining year on year voice and text rates together with the impact of lower mobile termination rates. This was partially offset by the shift in mix from prepay to contract subscribers which drove higher usage volumes per customer.

Off-net revenue for the three months ended September 30, 2009 decreased to £14.4 million from £14.9 million for the three months ended September 30, 2008 and decreased to £41.7 million from £47.7 million for the nine months ended September 30, 2008 mainly as a result of the overall reduction in the number of off-net broadband subscribers in recent quarters, partially offset by increased off-net telephony subscribers. Following the launch of wholesale line rental which allows us to bundle a

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telephone line rental product with our broadband product, we experienced off-net RGU net additions of 19,900 during the three months ended September 30, 2009 compared with net additions of 2,200 during the prior quarter and net declines during each of the three previous quarters.

Consumer Segment Contribution

For the three months ended September 30, 2009, Consumer segment contribution increased to £466.4 million from £450.5 million for the three months ended September 30, 2008. This increase was primarily due to the net increase in Consumer revenue, as described above, partially offset by increases in television program carriage costs related to our new agreement with BSkyB along with higher costs relating to subscriber equipment. For the nine months ended September 30, 2009, Consumer segment contribution was relatively flat at £1,358.6 million compared to £1,357.3 million for the nine months ended September 30, 2008. The net increase in Consumer revenue, as described above, and lower telephony costs resulting from lower usage were offset by increases in television program carriage costs related to our new agreement with BSkyB.

Summary On-net Statistics

Selected statistics for our on-net customers, excluding customers off our cable network, or off-net, and mobile customers, for the three months ended September 30, 2009 as well as the four prior quarters, are set forth in the table below. Our net customer movement for the three months ended September 30, 2009 was an increase of 8,100 customers, being the net of gross additions and disconnections. The increase in customers in the quarter following a decline in the prior quarter, was primarily due to increased product differentiation, more effective distribution channels and an increase in marketing. Net customer movement for the three months ended September 30, 2008 was an increase of 8,300 customers together with a reduction of 9,100 customers with respect to data cleanse activity following the migration of our final on-net residential billing system during that quarter. The reduction in net additions was primarily the result of fewer gross additions due in part to the soft macroeconomic environment. The total number of on-net RGUs grew to 11,603,200 at September 30, 2009 from 11,280,800 at September 30, 2008, representing a net increase in RGUs of 322,400.

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	Three months ended

	September 30, 2009			June 30, 2009			March 31, 2009			December 31, 2008			September 30, 2008
Opening customers		4,736,100			4,762,300			4,755,200			4,740,400			4,741,200
Customer additions		213,800			159,500			167,200			192,600			214,600
Customer disconnects		(205,700	)		(185,700	)		(160,100	)		(177,800	)		(206,300	)

Net customer movement		8,100			(26,200	)		7,100			14,800			8,300
Data cleanse(1)		—			—			—			—			(9,100	)

Closing customers		4,744,200			4,736,100			4,762,300			4,755,200			4,740,400
On-net churn(2)		1.5	%		1.3	%		1.1	%		1.2	%		1.5	%
On-net Revenue Generating Units(1)(3):
Television		3,709,000			3,672,000			3,651,600			3,621,000			3,576,500
DTV (included in Television)		3,599,300			3,543,300			3,510,400			3,469,000			3,407,900
Telephone		4,120,000			4,104,000			4,108,300			4,099,200			4,078,600
Broadband		3,774,200			3,735,200			3,730,100			3,682,800			3,625,700
Total On-net Revenue Generating Units		11,603,200			11,511,200			11,490,000			11,403,000			11,280,800
On-net RGU/Customer		2.45	x		2.43	x		2.41	x		2.40	x		2.38	x
Triple-play penetration		59.5	%		58.3	%		57.0	%		55.9	%		54.7	%
On-net Average Revenue Per User(4)(5)	£	44.24		£	43.27		£	42.29		£	42.34		£	42.00
On-net ARPU calculation:
On-net revenue (millions)(4)	£	627.6		£	616.8		£	604.0		£	603.5		£	596.2
Average customers		4,728,300			4,751,600			4,761,000			4,751,000			4,731,800

(1): Data cleanse activity with respect to August and September 2008 resulted in a decrease in reported customer numbers of 9,100 and a decrease in reported RGUs of 6,800, comprised of decreases of approximately 6,400 Broadband, 300 Telephone and 100 Television RGUs.
(2): Customer churn is calculated by taking the total disconnects during the month (excluding any data cleanse activity) and dividing them by the average number of customers during the month. Average monthly churn during a quarter is the average of the three monthly churn calculations within the quarter.
(3): Each telephone, television and broadband internet subscriber directly connected to our network counts as one RGU. Accordingly, a subscriber who receives both telephone and television service counts as two RGUs. RGUs may include subscribers receiving some services for free or at a reduced rate in connection with promotional offers.
(4): As a result of the treatment of sit-up as discontinued operations and the adjustment of prior periods, on-net revenues and on-net ARPU have increased as we previously eliminated revenues earned from sit-up on consolidation.
(5): The monthly cable average revenue per user, or on-net ARPU, is calculated on a quarterly basis by dividing total revenue generated from the provision of telephone, television and internet services to customers who are directly connected to our network in that period together with revenue generated from our customers using our virginmedia.com website, exclusive of VAT, by the average number of customers directly connected to our network in that period divided by three. For the purpose of calculating on-net ARPU, we have spread the data cleanse evenly over the three months of the quarter in which the data cleanse has been reported.

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Summary Mobile Statistics

Selected statistics for our mobile customers are set forth in the table below. Between September 30, 2009 and September 30, 2008, the number of mobile customers decreased by a net 236,900. Contract customer gains of 294,000 were offset by net losses of 530,900 prepay customers. The growth in contract customers reflects our strategy of using our own sales channels and cross-selling mobile contracts to our on-net customers. The decline in prepay customers reflects the continuing high level of competition in the prepay market.

	Three months ended

	September 30, 2009			June 30, 2009			March 31, 2009			December 31, 2008			September 30, 2008
Contract mobile customers(1):
Opening contract mobile customers		784,600			712,300			649,400			578,600			491,600
Net contract mobile customer additions		88,000			72,300			62,900			70,800			78,300
Data cleanse(2)		—			—			—			—			8,700

		88,000			72,300			62,900			70,800			87,000

Closing contract mobile customers		872,600			784,600			712,300			649,400			578,600
Prepay mobile customers (30 days)(1):
Opening prepay mobile customers		2,449,500			2,556,000			2,694,000			2,854,200			2,941,400
Net prepay mobile customer additions (disconnections)		(126,200	)		(106,500	)		(138,000	)		(160,200	)		(98,100	)
Data cleanse(2)		—			—			—			—			10,900

		(126,200	)		(106,500	)		(138,000	)		(160,200	)		(87,200	)

Closing prepay mobile customers (30 days)		2,323,300			2,449,500			2,556,000			2,694,000			2,854,200
Total closing mobile customers(1):		3,195,900			3,234,100			3,268,300			3,343,400			3,432,800
Mobile average revenue per user(3)	£	13.41		£	12.43		£	13.14		£	13.35		£	13.60
Mobile ARPU calculation:
Mobile service revenue (millions)	£	129.3		£	121.2		£	129.4		£	134.6		£	139.9
Average mobile customers		3,213,600			3,251,400			3,283,000			3,360,400			3,427,500

(1): Mobile customer information is for active customers. Prepay customers are defined as active customers if they have made an outbound call or text in the preceding 30 days. Contract customers are defined as active customers if they have entered into a contract with Virgin Mobile for a minimum 30-day period and have not been disconnected. Contract mobile customers include customers who have taken either a mobile service or a mobile broadband contract.
(2): Data cleanse activity with respect to the three months ended September 30, 2008 resulted in an increase in contract and prepay mobile customer numbers as disclosed above.
(3): Mobile monthly average revenue per user, or Mobile ARPU, is calculated on service revenue for the period, divided by the average number of active customers (contract and prepay) for the period, divided by three. For the purpose of calculating Mobile ARPU, we have spread the data cleanse evenly over the three months of the quarter in which the data cleanse has been reported.

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Summary Off-net Statistics

Selected statistics for our residential customers that are not connected directly through our cable network, or off-net customers, are set forth in the table below. Total off-net RGUs increased by 19,900 during the three months ended September 30, 2009 as compared to a decline of 15,000 off-net RGUs during the three months ended September 30, 2008. The increase in off-net RGUs in the current quarter is primarily due to improvements in both broadband and telephone net additions due to the launch of wholesale line rental in the quarter which allows us to offer a telephone line rental product bundled with our broadband product, which we believe makes our products more attractive to our customers, and new flexible consumer propositions.

		Three months ended

		September 30, 2009		June 30, 2009			March 31, 2009			December 31, 2008			September 30, 2008
Opening RGUs:
	Telephone		112,500		109,000			105,500			104,900			107,300
	Broadband		245,700		247,000			252,000			260,100			272,700

			358,200		356,000			357,500			365,000			380,000
Net Off-net RGU additions (disconnections):
	Telephone		12,400		3,500			3,500			600			(2,400	)
	Broadband		7,500		(1,300	)		(5,000	)		(8,100	)		(12,600	)

			19,900		2,200			(1,500	)		(7,500	)		(15,000	)
Closing Off-net RGUs:
	Telephone		124,900		112,500			109,000			105,500			104,900
	Broadband		253,200		245,700			247,000			252,000			260,100

			378,100		358,200			356,000			357,500			365,000

Business Segment

Revenue

The summary results of operations of our Business segment for the three months and nine months ended September, 30 2009 and 2008 were as follows (in millions):

	Three months ended September 30,				Nine months ended September 30,

	2009		2008		2009		2008
Revenue		£143.3		£153.4		£435.6		£470.9
Inter segment revenue		—		0.1		—		0.3
Segment contribution		86.3		83.3		252.6		248.8

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Our Business segment revenue for the three months and nine months ended September 30, 2009 and 2008 was as follows (in millions):

		Three months ended September 30,							Nine months ended September 30,

		Three months ended September 30,				Increase/ (Decrease)			Nine months ended September 30,				Increase/ (Decrease)
		2009		2008		Increase/ (Decrease)			2009		2008		Increase/ (Decrease)
Revenue:
	Retail:
	Voice		£44.3		£47.5		(6.7	)%		£134.5		£145.4		(7.5	)%
	Data		55.4		49.3		12.4			156.6		141.1		11.0
	LAN Solutions		7.6		13.6		(44.1	)		28.2		49.7		(43.3	)

			107.3		110.4		(2.8	)		319.3		336.2		(5.0	)
	Wholesale		36.0		43.0		(16.3	)		116.3		134.7		(13.7	)

Total revenue			£143.3		£153.4		(6.6	)%		£435.6		£470.9		(7.5	)%

For the three months ended September 30, 2009, revenue from business customers decreased by 6.6% to £143.3 million from £153.4 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, revenue from business customers decreased by 7.5% to £435.6 million from £470.9 million for the nine months ended September 30, 2008. These decreases were attributable to declines in retail voice, Local Area Network (LAN) solutions and wholesale revenues, partially offset by increases in retail data revenue. Consistent with our strategy to replace declining voice revenue with data revenue, we continue to experience a shift in the mix of retail revenue from voice to data. Retail data revenues represented 51.6% of the retail business revenues for the three months ended September 30, 2009 compared with 44.7% for the three months ended September 30, 2008 and 49.0% of the retail business revenues for the nine months ended September 30, 2009 compared with 42.0% for the nine months ended September 30, 2008.

LAN solutions revenue in the three months ended September 30, 2009 was £7.6 million compared to £13.6 million in the three months ended September 30, 2008. LAN solutions revenue in the nine months ended September 30, 2009 was £28.2 million compared to £49.7 million in the nine months ended September 30, 2008. The majority of this revenue is from infrastructure projects which are non-recurring in nature. Our largest infrastructure project was the provision of telecommunication network equipment for Heathrow airport's Terminal 5 which was completed in the three months ended March 31, 2009 and which contributed £3.8 million and £19.9 million of revenue for the three months and nine months ended September 30, 2008 as compared to £nil and £0.4 million for the three months and nine months ended September 30, 2009.

Wholesale revenue declined to £36.0 million and £116.3 million in the three months and nine months ended September 30, 2009 from £43.0 million and £134.7 million in the same periods in 2008 mainly due to reduced customer traffic.

Business Segment Contribution

For the three months ended September 30, 2009, Business segment contribution increased to £86.3 million from £83.3 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, Business segment contribution increased to £252.6 million from £248.8 million for the nine months ended September 30, 2008. The increases in segment contribution were due primarily to the result of higher margin retail data contracts replacing lower margin infrastructure projects.

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Content Segment

The summary results of operations of our Content segment for the three months and nine months ended September 30, 2009 and 2008 were as follows (in millions):

	Three months ended September 30,						Nine months ended September 30,

	2009			2008			2009		2008
Revenue		£34.0			£30.9			£102.3		£87.6
Inter segment revenue		7.0			6.4			20.2		19.2
Segment contribution		(0.4	)		(3.6	)		12.9		0.3

Revenue

For the three months ended September 30, 2009, revenue from our Content segment increased by 10.0% to £34.0 million from £30.9 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, revenue from our Content segment increased by 16.8% to £102.3 million from £87.6 million for the nine months ended September 30, 2008. These increases were due primarily to increased carriage revenue as a result of the carriage agreement entered into in November 2008 with BSkyB for continued and extended carriage of our Virgin Media TV channels on its satellite platform at higher rates than under the previous contract, partially offset by reduced advertising revenue in a declining TV advertising market, although Virgin Media TV increased its overall share of the TV advertising market.

Content Segment Contribution

Content segment contribution increased to £(0.4) million from £(3.6) million for the three months ended September 30, 2008 and increased to £12.9 million from £0.3 million for the nine months ended September 30, 2008. The segment contribution improvements are mainly due to the increase in revenue, as described above, and reduced other operating costs, partially offset by increased programming costs.

Television Channel Joint Ventures

We own 50% of the companies that comprise UKTV, a group of joint ventures formed with BBC Worldwide. UKTV produces a portfolio of television channels based on the BBC's program library and other acquired programming and which are carried on Virgin Media's cable platform and also satellite. Some channels are also available on Freeview.

We account for our interest in UKTV under the equity method and recognized a share of net income of £5.5 million and £3.2 million for the three months ended September 30, 2009, and 2008, respectively, and £9.6 million and £14.4 million for the nine months ended September 30, 2009, and 2008 respectively. At September 30, 2009, our investment in UKTV was carried on the balance sheet at £355.3 million, which includes an outstanding loan totaling £131.6 million.

UKTV receives financing through a loan from Virgin Media, which was £131.6 million at September 30, 2009. This loan effectively acts as a revolving facility for UKTV. We received net loan capital repayments of £8.2 million and £8.9 million from UKTV during the three and nine months ended September 30, 2009. We also received interest payments, dividends and payments for consortium tax relief from UKTV totaling £3.0 million and £6.0 million for the three months and nine months ended September 30, 2009.

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Liquidity and Capital Resources

As of September 30, 2009, we had £5,972.0 million of debt outstanding, compared to £6,170.1 million as of December 31, 2008 and £6,082.6 million as of September 30, 2008, and £351.6 million of cash and cash equivalents, compared to £181.6 million as of December 31, 2008 and £521.4 million as of September 30, 2008. The decrease in debt since September 30, 2008 is primarily attributable to the voluntary prepayment of £300 million of senior bank debt in December 2008 partially offset by movements in exchange rates. The decrease in debt from December 31, 2008 is primarily due to movements in exchange rates.

As discussed in greater detail below, on June 3, 2009, we issued $750 million aggregate principal amount of 9.50% senior notes due 2016 and €180 million aggregate principal amount of 9.50% senior notes due 2016. On July 21, 2009, we issued an additional $600 million aggregate principal amount of 9.50% senior notes due 2016 under the same terms as the notes issued on June 3, 2009. We used the net proceeds from the June 2009 note issuance and the July 2009 note issuance, together with additional cash reserves, to repay £608.5 million and £403.6 million, respectively, of our obligations under our senior credit facility that were originally scheduled to be paid in 2010 and 2012.

Our business is capital intensive and we are highly leveraged. We have significant cash requirements for operating costs, capital expenditures and interest expense. We also have significant principal payments under our senior credit facility due from 2011 to 2013, as described below. The level of our capital expenditures and operating expenditures are affected by the significant amounts of capital required to connect customers to our network, expand and upgrade our network and offer new services. We expect that our cash on hand, together with cash from operations and amounts undrawn on our revolving credit facility, will be sufficient for our cash requirements through September 30, 2010. However, our cash requirements after September 30, 2010 may exceed these sources of cash.

Significant principal payments under our senior credit facility were due in 2010 and 2011. However, following the amendment of the terms of our senior credit facility in November 2008, and subsequent satisfaction of the applicable prepayment conditions in June 2009, a significant portion of these payments was deferred to 2012. We expect to be able to address the remaining scheduled principal payments due in 2010 and 2011 through cash flow from operations. However, if we were unable to service these obligations through cash flow from operations, then we would need to secure additional funding such as raising additional debt or equity, refinancing our existing facility, selling assets or using other means. We may not be able to obtain financing or sell assets, at all or on favorable terms, or we may be contractually prevented by the terms of our senior notes or our senior credit facility from incurring additional indebtedness or selling assets. We also have significant principal payments due in 2012 under our senior credit facility that we can address only by a comprehensive refinancing of our senior debt and possibly other debt instruments. Our ability to implement such a refinancing successfully is significantly dependent on sustained improvements in the debt capital markets.

Our long term debt was issued by Virgin Media Inc. and certain of its subsidiaries that have no independent operations or significant assets other than investments in their respective subsidiaries. As a result, they will depend upon the receipt of sufficient funds from their respective subsidiaries to meet their obligations. In addition, the terms of our existing and future indebtedness and the laws of the jurisdictions under which our subsidiaries are organized limit the payment of dividends, loan repayments and other distributions from them under many circumstances.

Our debt agreements contain restrictions on our ability to transfer cash between groups of our subsidiaries. As a result of these restrictions, although our overall liquidity may be sufficient to satisfy our obligations, we may be limited by covenants in some of our debt agreements from transferring cash to other subsidiaries that might require funds. In addition, cross default provisions in our other indebtedness may be triggered if we default on any of these debt agreements.

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Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2009 and 2008

For the nine months ended September 30, 2009, cash provided by operating activities increased to £643.1 million from £597.5 million for the nine months ended September 30, 2008. This increase was attributable to the improvement in operating results and lower cash interest payments, partially offset by higher working capital costs. For the nine months ended September 30, 2009, cash paid for interest, exclusive of amounts capitalized, decreased to £253.2 million from £349.7 million during the same period in 2008. This decrease was primarily due to differences in the timing of interest payments on our senior credit facility and lower interest rates.

For the nine months ended September 30, 2009, cash used in investing activities was £421.4 million compared with cash used in investing activities of £327.0 million for the nine months ended September 30, 2008. The cash used in investing activities in the nine months ended September 30, 2009 and 2008 mainly represented purchases of fixed assets. Purchases of fixed and intangible assets increased to £413.2 million for the nine months ended September 30, 2009 from £338.7 million for the same period in 2008 primarily due to lower use of finance leases for acquisition of capital equipment together with increased scaleable infrastructure costs relating to broadband speed upgrades.

Cash used in financing activities for the nine months ended September 30, 2009 was £42.4 million compared to £59.6 million for the nine months ended September 30, 2008. Cash used in financing activities for the nine months ended September 30, 2009 primarily arose from principal payments on long term debt offset by new debt issuances and realized gains on derivatives. Cash used in financing activities for the nine months ended September 30, 2008 primarily represented principal repayments on long term debt and capital lease totaling £533.2 million offset by new borrowings under the convertible senior notes, net of financing fees, of £493.4 million.

Senior Credit Facility

In 2006, we entered into a senior credit facility in an aggregate principal sterling equivalent amount of £5,275 million, comprising a £3,350 million 5 year amortizing Tranche A term loan facility, a £175 million 5 year amortizing Tranche A1 term loan facility, a £300 million 6¹/2 year bullet Tranche B1 term loan facility, a £351 million 6¹/2 year bullet Tranche B2 term loan facility, a €500 million 6¹/2 year bullet Tranche B3 term loan facility, a $650 million 6¹/2 year bullet Tranche B4 term loan facility, a £300 million 7 year bullet Tranche C term loan facility and a £100 million 5 year multi-currency revolving loan facility. In April 2007, we amended the senior credit facility and borrowed an additional £890 million under a 5¹/2 year bullet Tranche B5 term loan facility and a 5¹/2 year bullet Tranche B6 term loan facility and used the net proceeds to repay some of our obligations under the Tranche A and Tranche A1 term loan facilities.

On November 10, 2008, we further amended our senior credit facility. Among other things, this amendment allowed us to defer over 70.3% of the remaining principal payments due in 2010 and 2011 to June 2012, extend the maturity of over 72.3% of the existing revolving facility from March 2011 to June 2012 and reset certain financial covenant ratios. These changes became effective in June 2009 following our satisfaction of the repayment condition under the senior credit facility. Upon satisfaction of the repayment condition, the applicable interest margin in respect of the principal amounts that were deferred and the extended revolving facility also increased by 1.375%, and we were required to pay £11.5 million in fees.

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The remaining principal payments on our senior credit facility as of September 30, 2009 were scheduled as follows (in millions):

Date	Amount

September 30, 2010	£	0.2
March 3, 2011		285.7
June 3, 2012		677.5
September 3, 2012		1,863.4
March 3, 2013		300.0

Total		£3,126.8

If we prepay any amounts due in 2010 and 2011 prior to their scheduled repayment, whether voluntarily or because the terms of our senior credit facility require us to make a prepayment, we will have to make simultaneous prepayments in respect of certain other tranches of the senior credit facility. For example, if we choose to prepay £100 million of the amounts due in 2010 we would be required to make a simultaneous prepayment of £295 million in respect of outstandings otherwise payable in 2012.

Our 2008 Annual Report contains a more detailed description of the terms of our senior credit facility.

Senior Notes

On June 3, 2009, Virgin Media Finance PLC, or Virgin Media Finance, issued $750 million aggregate principal amount of 9.50% senior notes due 2016 and €180 million aggregate principal amount of 9.50% senior notes due 2016, collectively the 9.50% senior notes due 2016. The 9.50% senior notes due 2016 are unsecured senior obligations of Virgin Media Finance and rank pari passu with Virgin Media Finance's outstanding senior notes due 2014 and 2016. Interest is payable on February 15 and August 15 of each year. The 9.50% senior notes due 2016 mature on August 15, 2016 and are guaranteed by Virgin Media, Virgin Media Group LLC, VMIH and certain other intermediate holding companies of Virgin Media. On July 21, 2009, we issued an additional $600 million aggregate principal amount of 9.50% senior notes due 2016 under the same terms as the notes issued on June 3, 2009.

On July 25, 2006, Virgin Media Finance issued $550 million aggregate principal amount of 9.125% senior notes due 2016. The 9.125% senior notes due 2016 are unsecured senior obligations of Virgin Media Finance and rank pari passu with Virgin Media Finance's outstanding senior notes due 2014 and 2016. Interest is payable on February 15 and August 15 of each year. The 9.125% senior notes due 2016 mature on August 15, 2016 and are guaranteed by Virgin Media, Virgin Media Group LLC, VMIH and certain other intermediate holding companies of Virgin Media.

On April 13, 2004, Virgin Media Finance issued $425 million aggregate principal amount 8.75% senior notes due 2014, £375 million aggregate principal amount of 9.75% senior notes due 2014 and €225 million aggregate principal amount of 8.75% senior notes due 2014. The senior notes due 2014 are unsecured senior obligations of Virgin Media Finance and rank pari passu with Virgin Media Finance's outstanding senior notes due 2016. Interest is payable on April 15 and October 15 of each year. The senior notes due 2014 mature on April 15, 2014 and are guaranteed by Virgin Media, Virgin Media Group LLC, VMIH and certain of the intermediate holding companies in the group.

Convertible Senior Notes

On April 16, 2008, Virgin Media Inc. issued $1.0 billion aggregate principal amount of 6.50% convertible senior notes due 2016. The convertible senior notes are unsecured senior obligations of

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Virgin Media Inc. and, consequently, are subordinated to our obligations under the senior credit facility and rank equally with Virgin Media Inc.'s guarantees of the senior notes. Interest is payable semi-annually on May 15 and November 15 of each year. The convertible senior notes mature on November 15, 2016 and may not be redeemed by us prior to their maturity date. Upon conversion, we may elect to settle in cash, shares of common stock or a combination of cash and shares of our common stock.

Our 2008 Annual Report contains a more detailed description of the terms of our convertible senior notes.

Debt Ratings

To access public debt capital markets, we rely on credit rating agencies to assign corporate credit ratings. A rating is not a recommendation by the rating agency to buy, sell or hold our securities. A credit rating agency may change or withdraw our ratings based on its assessment of our current and future ability to meet interest and principal repayment obligations. Lower credit ratings generally result in higher borrowing costs and reduced access to debt capital markets. The corporate debt ratings and outlook currently assigned by the rating agencies engaged by us are as follows:

	Corporate Rating	Outlook

Moody's Investors Service Inc.	Ba3	Stable
Standard & Poor's	B+	Stable
Fitch	BB-	Stable

Cash Dividends

During the year ended December 31, 2008 and the nine months ended September 30, 2009, we paid the following dividends:

Board Declaration Date	Per Share				Total Amount

					(in millions)
Year ended December 31, 2008:
February 6, 2008	$	0.04	March 12, 2008	March 20, 2008		£6.6
May 21, 2008		0.04	June 12, 2008	June 20, 2008		6.7
September 2, 2008		0.04	September 12, 2008	September 22, 2008		7.1
November 25, 2008		0.04	December 12, 2008	December 22, 2008		8.9
Nine months ended September 30, 2009:
February 27, 2009	$	0.04	March 12, 2009	March 20, 2009		£9.0
May 29, 2009		0.04	June 12, 2009	June 22, 2009		8.0
August 27, 2009		0.04	September 11, 2009	September 21, 2009		8.1

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Off-Balance Sheet Arrangements

As of September 30, 2009 and 2008, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K under the Securities Exchange Act of 1934, as amended.

Contractual Obligations and Commercial Commitments

The following table includes aggregate information about our contractual obligations as of September 30, 2009, and the periods in which payments are due (in millions):

			Payments Due by Period

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long Term Debt Obligations		£5,802.8	£	2.5		£2,827.4		£1,146.4		£1,826.5
Capital Lease Obligations		254.0		50.5		101.8		20.6		81.1
Operating Lease Obligations		327.8		56.8		97.7		70.6		102.7
Purchase Obligations		788.2		451.1		200.9		61.3		74.9
Interest Obligations		1,917.9		408.8		799.7		448.6		260.8

Total		£9,090.7		£969.7		£4,027.5		£1,747.5		£2,346.0

Early Termination Charges			£	23.0	£	9.5	£	2.4	£	—

On July 21, 2009, we issued senior notes and used the net proceeds to make repayments on our senior credit facility as discussed under Liquidity and Capital Resources and Long Term Debt above. Early termination charges are amounts that would be payable in the above periods in the event of early termination during that period of certain of the contracts underlying the purchase obligations listed above.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, like foreign currency exchange and interest rates. As some of our indebtedness accrues interest at variable rates, we have exposure to volatility in future cash flows and earnings associated with variable interest rate payments.

Also, substantially all of our revenues and operating costs are earned and paid in pounds sterling but we pay interest and principal obligations on some of our indebtedness in U.S. dollars and euros. As of September 30, 2009, £2,212.7 million, or 37.1% of our indebtedness, was denominated in U.S. dollars and £730.8 million, or 12.2%, of our indebtedness was denominated in euros. As a result, we have exposure to volatility in future cash flows and earnings associated with changes in foreign exchange rates on payments of principal and interest on a portion of our indebtedness.

To mitigate the risk from these exposures, we have implemented a cash flow hedging program. The objective of this program is to reduce the volatility of our cash flows and earnings caused by changes in underlying rates. To achieve this objective we have entered into a number of derivative instruments. The derivative instruments utilized comprise interest rate swaps, cross-currency interest rate swaps and foreign currency forward contracts. We do not enter into derivative instruments for trading or speculative purposes. See note 6 to Virgin Media's consolidated financial statements.

The fair market value of long term fixed interest rate debt and the amount of future interest payments on variable interest rate debt are subject to interest rate risk.

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The following table provides information as of September 30, 2009 about our long term fixed and variable interest rate debt that are sensitive to changes in interest rates and foreign currency exchange rates (in millions):

	Year ended December 31,

	Year ended December 31,							Fair Value September 30, 2009
	2009	2010	2011	2012	2013	Thereafter	Total	Fair Value September 30, 2009
Long term debt (including current portion)
U.S. Dollars
Fixed rate	—	—	—	—	—	$3,325.0	$3,325.0	$3,479.6
Variable rate	—	—	—	$445.1	—	—	$445.1	$425.1
Average interest rate				LIBOR plus 2.0-3.5%		6.726%
Average forward exchange rate				0.63		0.64
Euros
Fixed rate	—	—	—	—	—	€405.0	€405.0	€420.9
Variable rate	—	—	—	€402.2	—	—	€402.2	€384.1
Average interest rate				LIBOR plus 2.0-3.5%		9.083%
Average forward exchange rate				0.94		0.96
Pounds Sterling
Fixed rate	—	—	—	—	—	£375.0	£375.0	£390.0
Variable rate	—	£0.2	£285.7	£1,895.1	£300.0	—	£2,481.0	£2,359.2
Average interest rate		LIBOR plus 1.25-3.125%	LIBOR plus 1.25-3.125%	LIBOR plus 2.125-3.625%	LIBOR plus 2.75%	9.750%
Currency swap agreements related to long term debt
Receipt of U.S. Dollars (interest and principal)
Notional amount	—	—	$425.0	$445.1	—	$1,900.0	$2,770.1	$76.7
Average forward exchange rate			0.68	0.54		0.60
Average sterling interest rate paid			9.53%	US LIBOR plus 2.13%		9.56%
Receipt of U.S. Dollars (interest only)
Notional amount	—	—	—	—	—	$1,000	$1,000	£36.7
Average contract exchange rate						0.51
Average sterling interest rate paid						6.95%
Receipt of Euros (interest and principal)
Notional amount	—	—	€225.0	€402.2	—	€180.0	€807.2	£98.6
Average contract exchange rate			0.92	0.69		0.88
Average sterling interest rate paid			8.90%	EURIBOR plus 2.16%		10.18
Interest rate derivative financial instruments related to long term debt
Sterling Interest Rate Swaps
Notional amount		£3,000.0	£200.0	£1,300.0	£300.0	—	£4,800.0	£(36.6	)
Average sterling interest rate paid		2.18%	2.57%	3.07%	3.28%
Sterling interest rate received		LIBOR	LIBOR	LIBOR	LIBOR

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) as of the end of the period covered by this report. Based on

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this evaluation, our chief executive officer and principal financial officer have concluded that, as of the end of such period, these controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various disputes and litigation arising in the ordinary course of our business. While we do not believe any of these litigation matters alone or in the aggregate will have a material adverse effect on our financial position or results of operation, any adverse outcome in one or more of these matters could be material to our consolidated financial statements for any one period.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors discussed under "Risk Factors" and elsewhere in our 2008 Annual Report, except for the following:

The sectors in which we compete are subject to rapid and significant changes in technology, and the effect of technological changes on our businesses cannot be predicted.

The broadband internet, television, fixed line telephone and mobile telephone services sectors are characterized by rapid and significant changes in technology. Advances in current technologies, such as VoIP (over fixed and mobile technologies), mobile instant messaging, wireless fidelity, or WiFi, the extension of local WiFi networks across greater distances, or WiMax, enhancements to existing mobile network technologies that increase capacity and speed such as Long Term Evolution, or LTE, internet protocol television, or future technological breakthroughs, may result in our core offerings becoming less competitive or render our existing products and services obsolete. We may not be able to develop new products and services at the same rate as our competitors or keep up with trends in the technology market as well as our competitors. The cost of implementing emerging and future technologies could be significant, and our ability to fund that implementation may depend on our ability to obtain additional financing. Similarly, the deployment of new services, such as LTE services, in the spectrum frequencies in which we operate could have an impact on the existing services offered by us, with consequential impact on our business.

Virgin Mobile relies on T-Mobile's network to carry its communications traffic.

Virgin Mobile relies on its long term agreement with T-Mobile for voice, non-voice and other telecommunications services which we provide to our mobile customers, as well as for certain ancillary services such as pre-pay account management. If the agreement with T-Mobile is terminated or is required to be divested by T-Mobile by a regulator, or if T-Mobile fails to deploy and maintain its network, or if T-Mobile fails to provide the services as required under our agreement with it and we are unable to find a replacement network operator on a timely and commercial basis, if at all, we could be prevented from carrying on our mobile business or, if we found a replacement operator, we may be able to carry on our mobile business only on less favorable terms or provide less desirable services. Additionally, any migration of all or some of our customer base to a new operator would be in part dependent on T-Mobile and could entail potential technical or commercial risk. T-Mobile is also a customer of our business division. Any disagreements between T-Mobile and Virgin Mobile may affect our other relationships with T-Mobile.

We continue to face amortization pressures under our senior credit facility. We may not be able to refinance our debt obligations or may be able to refinance only on terms that will increase our cost of borrowing.

As of September 30, 2009, we had amortization payments of £0.2 million and £285.7 million due in 2010 and 2011, respectively. We expect to be able to address those payments through cash flow from operations and, if required, amounts then undrawn on our revolving credit facility. However, if we should need to secure additional funding, we may not be able to obtain financing or sell assets, at all or

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on favorable terms, or we may be contractually prevented by the terms of our senior notes or our senior credit facility from incurring additional indebtedness or selling assets.

As of September 30, 2009, we also had amortization payments of £2,540.9 million due in 2012. We do not expect to generate sufficient cash flow from operations to satisfy all of the 2012 payments. We expect to address this shortfall in advance thereof through a comprehensive refinancing of our senior secured debt, which may take place at any time before the amortization payments are due. Our ability to implement such a refinancing successfully is significantly dependent on sustained improvements in the debt markets. Even if the debt markets improve, the size of the amounts outstanding under our senior credit facility may be too large to be refinanced with senior bank debt and we may need to raise additional capital by doing one or more of the following:

•: raising additional debt other than senior bank debt, such as secured or unsecured high yield debt, on terms that may increase our cost of borrowing or result in more onerous terms;
•: selling or disposing of some of our assets, possibly on unfavorable terms; or
•: issuing equity or equity-related instruments that will dilute the equity ownership interest of existing stockholders.

We cannot be sure that any of, or any combination of, the above actions would be available or sufficient to fund our debt obligations or that we will be able to refinance our debt obligations on favorable terms or at all.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a): Not applicable.
(b): Not applicable.
(c): None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit No.

	3.1		Second restated certificate of incorporation of Virgin Media Inc. (Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 1, 2007).
	3.2		Restated by-laws of Virgin Media Inc. (Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 1, 2007).
	10.1		Second Amended and Restated Employment Agreement, dated as of July 3, 2009, between Virgin Media Inc. and James F. Mooney (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on July 7, 2009).
	10.2		Service Agreement, dated as of July 3, 2009, between Virgin Media Limited and Neil Berkett (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on July 7, 2009).
	10.3		Restricted Stock Agreement, dated as of July 3, 2009, between Virgin Media Inc. and James F. Mooney (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on July 7, 2009).
	10.4		Restricted Stock Agreement, dated as of July 3, 2009, between Virgin Media Inc. and Neil Berkett (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on July 7, 2009).
	10.5		Amendment Agreement dated July 28, 2009, relating to the Employment Agreement dated as of August 4, 2008, between Virgin Media Inc. and Bryan Hall (Incorporated by reference to Exhibit 10.10 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on August 7, 2009).
	10.6		Service Agreement, dated as of July 10, 2009, between Virgin Media Limited and Andrew Barron (Incorporated by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on August 7, 2009).
	10.7		Amendment Agreement dated July 31, 2009, relating to the Employment Agreement dated as of September 18, 2007, between Virgin Media Inc. and Mark Schweitzer (Incorporated by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on August 7, 2009).
	10.8		Service Agreement, dated as of July 31, 2009, between Virgin Media Limited and Robert Gale (Incorporated by reference to Exhibit 10.13 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on August 7, 2009).
	10.9		Form of Amended Non-Qualified Stock Option Notice relating to Virgin Media 2009-2011 Long-term Incentive Plan (Incorporated by reference to Exhibit 10.14 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on August 7, 2009).
	10.10		Service Agreement, dated as of September 16, 2009, between Virgin Media Limited and Eamonn O'Hare (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on September 18, 2009).

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Exhibit No.

	10.11		Non-Qualified Stock Option Notice, dated as of September 16, 2009, between Virgin Media Inc. and Eamonn O'Hare (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on September 18, 2009).
	10.12		Restricted Stock Agreement, dated as of September 16, 2009, between Virgin Media Inc. and Eamonn O'Hare (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on September 18, 2009).
	10.13		Restricted Stock Agreement, dated as of September 16, 2009, between Virgin Media Inc. and Eamonn O'Hare (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on September 18, 2009).
	10.14		Third Amended and Restated Employment Agreement, dated as of September 15, 2009, between Virgin Media Inc. and Bryan H. Hall (Incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on September 18, 2009).
	10.15		Incentive Stock Option Notice, dated as of September 15, 2009, between Virgin Media Inc. and Bryan H. Hall (Incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on September 18, 2009).
	10.16*		Description of Change in Treatment of Employer National Insurance with Respect to Stock Option Awards.
	31.1*		Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) under the Exchange Act.
	31.2*		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) under the Exchange Act.
	32.1*		Certifications of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*: Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.


	VIRGIN MEDIA INC.
Date: October 29, 2009	By:	/s/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer
Date: October 29, 2009	By:	/s/ ROBERT GALE Robert Gale Principal Financial Officer
	VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
Date: October 29, 2009	By:	/s/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer
Date: October 29, 2009	By:	/s/ ROBERT GALE Robert Gale Principal Financial Officer

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Virgin Media Inactive 10-Q2009 Q3 Quarterly report

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