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

FORM 10-Q

Commission File No. 000-50886

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

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
(Additional Registrant)

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

Large accelerated filers ý    Accelerated filer o    Non-accelerated filer o    Smaller reporting company o

        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 August 4, 2008, there were 328,107,207 shares of the registrant's common stock, par value $0.01 per share, issued and outstanding, excluding 855,834 unvested shares of restricted stock held in escrow.

        The Additional Registrant meets the conditions set forth in General Information 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 JUNE 30, 2008
INDEX

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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," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify these forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated, projected, forecasted, estimated or budgeted, whether expressed or implied, by these forward-looking statements. These factors, among others, include:

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the ability to compete with a range of other communications and content providers;



•

the ability to manage customer churn;



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the continued right to use the Virgin name and logo;



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the ability to maintain and upgrade our networks in a cost-effective and timely manner;



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possible losses in revenues due to systems failures;



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the ability to provide attractive programming at a reasonable cost;



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the ability to control unauthorized access to our network;



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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;



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the ability to achieve our business plans;



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the ability to fund debt service obligations through operating cash flow;



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the ability to obtain additional financing in the future and react to competitive and technological changes;



•

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 under "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission, or SEC, on February 29, 2008, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as filed with the SEC on May 8, 2008. We assume no obligation to update our forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.

        In this quarterly report, unless we have indicated otherwise, or the context otherwise requires, references to:

•

"Virgin Media," "the Company," "we," "us," "our" and similar terms refer to Virgin Media Inc. and its subsidiaries (which include Telewest Global, Inc., or Telewest, and its subsidiaries and Virgin Mobile Holdings (UK) Ltd, or Virgin Mobile, and its subsidiaries);



•

"NTL" refers to NTL Incorporated and its subsidiaries as they existed prior to the name change to Virgin Media Inc., and prior to the merger with Telewest, refers to the company now known as Virgin Media Holdings Inc. (which was formerly known as NTL Incorporated before the merger); and

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"Telewest" refers to Telewest Global, Inc. and its subsidiaries as they existed prior to the merger with NTL in March 2006.

Note Concerning Virgin Media Investments Holdings Limited

        This quarterly report on Form 10-Q (excepting separate financial statements responsive to Part I, Item 1) covers both Virgin Media and Virgin Media Investment Holdings Limited, or VMIH, a company incorporated in England and Wales with its address 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. VMIH is not an accelerated filer. VMIH is one of the guarantors of Virgin Media Finance PLC's 9.75% senior notes due 2014 (sterling denominated), 8.75% senior notes due 2014 (euro denominated), 8.75% senior notes due 2014 (U.S. dollar denominated), and 9.125% senior notes due 2016 (U.S. dollar denominated). 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. In this quarterly report, unless the context otherwise requires, the terms "Virgin Media," "the Company," "we," "us," "our" and similar terms refer to the consolidated business of Virgin Media Inc., including VMIH and its subsidiaries. Unless otherwise indicated, the discussion contained in this report applies to VMIH as well as Virgin Media Inc.

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 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)

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Note:    The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date.

See accompanying notes.

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VIRGIN MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

See accompanying notes.

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VIRGIN MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

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 for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 29, 2008, as amended.

        Certain prior year balances have been reclassified to conform to the current period presentation.

Note 2—Goodwill and Intangible Assets

        During the six months ended June 30, 2008, assets not subject to amortization were adjusted for the following (in millions):

        During the six months ended June 30, 2008, reorganization value in excess of amounts allocable to identifiable assets was reduced by £5.3 million due to the use of deferred tax assets that existed as at January 10, 2003 that were previously offset by a valuation allowance.

        As at June 30, 2008, we performed our annual impairment review of the goodwill recognized in the Virgin Media TV and sit-up reporting units, included in our Content segment, and the Virgin Mobile reporting unit. The fair value of these reporting units were determined through the use of a combination of both the market and income valuation approaches to calculate fair value. We concluded that the fair value of the Virgin Media TV and sit-up reporting units exceeded their carrying value, while the Virgin Mobile reporting unit fair value was less than its carrying value.

        The market approach valuations in respect of the Mobile reporting unit have declined from the prior year primarily as a result of declining market multiples of comparable companies. The income approach valuations in respect of the 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. As a result, we extended our review to include the valuation of the Virgin Mobile reporting unit's individual assets and liabilities and have recognized a preliminary goodwill impairment charge of £366.2 million. We intend to complete our impairment review during the third quarter and any further adjustments to the carrying value of goodwill, if required, will be recognized in our third quarter results.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 3—Long Term Debt

        Long term debt consists of (in millions):

        The effective interest rate on the senior credit facility was 7.4% and 7.8% as at June 30, 2008 and December 31, 2007, respectively.

Convertible Senior Notes

        On April 16, 2008, Virgin Media Inc. issued U.S. dollar denominated 6.5% convertible senior notes due 2016 with a principal amount outstanding of $1.0 billion and used the proceeds and cash on hand to repay £504.0 million of our obligations under our senior credit facility that were originally scheduled to be paid in 2009, 2010 and 2012. The convertible senior notes are unsecured senior obligations of 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 our senior notes. The convertible senior notes bear interest at an annual rate of 6.5% payable semi-annually on May 15 and November 15 of each year, beginning November 15, 2008. 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.

        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. under goes a

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 3—Long Term Debt (Continued)

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 dividends or distributions, the issuance of certain rights or warrants, certain cash dividends or distributions or stock repurchases where the price exceeds market values. In the event of specified fundamental changes relating to Virgin Media Inc., referred to as "make whole" fundamental changes, the conversion rate will be increased as provided by a formula set forth in the indenture governing the convertible senior notes.

        Holders may also require us to repurchase the convertible senior notes for cash in the event of a fundamental change for a purchase price equal to 100% of the principal amount, plus accrued but unpaid interest to the purchase date.

        In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash Upon Conversion, or FSP APB 14-1. FSP APB 14-1 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 would be recorded at a discount reflecting its below market coupon interest rate, and the liability component would subsequently be 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. This change in methodology will affect the calculations of net income and earnings per share, but will not increase the Company's cash interest payments. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Retrospective application to all periods presented is required and early adoption is prohibited. Our convertible senior notes are within the scope of FSP APB 14-1. We are currently evaluating the impact of the adoption of FSP APB 14-1 on our consolidated financial statements.

Note 4—Employee Benefit Plans

        The components of net periodic pension cost in the three and six months ended June 30, 2008 and 2007 were as follows (in millions):

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Other (Income) Charges Including Restructuring Charges

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

 

        Other income of £1.7 million and other charges of £3.1 million for the three months ended June 30, 2008 and 2007, respectively, and other charges of £2.9 million and £14.7 million for the six months ended June 30, 2008 and 2007, respectively, relate mainly to lease exit and employee termination costs as a result of our acquisition-related restructuring programs.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 6—Stockholders' Equity and Share Based Compensation

        During the year ended December 31, 2007 and the six months ended June 30, 2008, we paid the following dividends:

        Future payments of regular quarterly dividends by us are at the discretion of our 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.

        Basic and diluted net loss per share is computed by dividing the net loss for the three and six months ended June 30, 2008 and 2007 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 June 30, 2008 and 2007, respectively, are excluded from the calculation of diluted loss per share, since these securities are anti-dilutive.

        The average number of shares outstanding for the three and six months ended June 30, 2008 and 2007 is computed as follows (in millions):

        Total share based compensation expense included in selling, general and administrative expenses in the statement of operations was £5.1 million and £7.1 million for the three months ended June 30, 2008 and 2007, respectively, and £7.2 million and £14.3 million for the six months ended June 30, 2008 and 2007, respectively.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 7—Comprehensive Loss

        Comprehensive loss comprises (in millions):

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

Note 8—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. generally accepted accounting principles, 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.

        For the three and six months ended June 30, 2008, income tax benefit was £0.6 million and £7.9 million, respectively, as compared with income tax expense of £7.2 million and £10.7 million, respectively, for the same periods in 2007. The income tax benefit for the three months ended June 30, 2008 was comprised of current federal tax expense of £0.2 million, deferred federal tax expense of £4.2 million, a U.K. current tax benefit of £1.2 million and a U.K. deferred tax benefit of £3.8 million.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 8—Income Taxes (Continued)

The income tax benefit for the six months ended June 30, 2008 was comprised of current federal tax expense of £0.4 million, deferred federal tax expense of £7.5 million, a U.K. current tax benefit of £2.5 million and a U.K. deferred tax benefit of £13.3 million. 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 related to the decrease in our deferred tax asset valuation allowance due to changes in our assessment of the future realization of certain deferred tax assets. Such changes resulted from the recording of certain deferred tax liabilities related to amounts recognized in the statement of other comprehensive income during the quarter that are expected to reverse in future periods and will allow us to offset such amounts against certain deferred tax assets. The income tax expense for the three months ended June 30, 2007 was comprised of current federal taxes of £0.4 million, a U.S. state and local tax benefit of £nil, deferred federal tax expense of £8.6 million and a U.K. tax benefit of £1.8 million. The income tax expense for the six months ended June 30, 2007 was comprised of current federal taxes of £0.7 million, a U.S. state and local tax benefit of £0.6 million, deferred federal tax expense of £13.7 million and a U.K. tax benefit of £3.1 million. The U.K. tax benefit related to amounts receivable in respect of the sale of U.K. tax losses to an equity-method investee.

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

Note 9—Fair Value Measurements

        In September 2006, the FASB issued Statement No. 157, Fair Value Measurements, or FAS 157. FAS 157 provides guidance for using fair value to measure assets and liabilities. It also responds to investors' requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. FAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. FAS 157 is effective for certain financial instruments included in financial statements issued for fiscal years beginning after November 15, 2007 and for all other non-financial instruments for fiscal years beginning after November 15, 2008. The provisions of FAS 157 relating to certain financial instruments were required to be adopted by us in the first quarter of 2008 effective January 1, 2008. The adoption of this standard did not have a material impact on our consolidated financial statements.

        FAS 157, 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). FAS 157 classifies the inputs used to measure fair value into the following hierarchy:

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 9—Fair Value Measurements (Continued)

        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 level 2 in the fair value hierarchy described above.

        The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2008 and December 31, 2007 (in millions):

        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. Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes and we do not use leveraged derivative financial instruments. The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using broker quotations, or market transactions in either the listed or over-the counter markets. As such, these derivative instruments are classified within level 2 in the fair value hierarchy.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 10—Recent Accounting Pronouncements

        In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115, or FAS 159. FAS 159 allows companies to elect to measure certain assets and liabilities at fair value and is effective for fiscal years beginning after November 15, 2007. We did not elect to utilize the fair value option permitted by FAS 159 for any of our assets or liabilities as at December 31, 2007.

        In December 2007, the FASB issued FAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, or FAS 160. FAS 160 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. FAS 160 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. We are currently assessing the impact of FAS 160 on our consolidated financial position and results of operations.

Note 11—Industry Segments

        Our reportable segments, Cable, Content and Mobile, are based on our method of internal reporting. Our primary segment is our Cable segment, which consists of the distribution of television programming to consumers and the provision of broadband and fixed line telephone services to consumers, businesses and public sector organizations on our cable network and, to a lesser extent, off our cable network. We operate our Content segment through our wholly owned subsidiaries Virgin Media Television Limited, or Virgin Media TV, and sit-up Limited, or sit-up, which supply television programming to the U.K. pay-television broadcasting market including our televised shopping unit sit-up tv, which markets and retails a wide variety of consumer products using an auction-based format. We operate our Mobile segment through our wholly owned subsidiary Virgin Mobile Holdings (UK) Ltd., which consists of our mobile telephony business. Our segments operate entirely in the U.K. and no one customer represents more than 5% of our overall revenue.

        Segment operating income before depreciation, amortization and other charges, which we refer to as Segment OCF, is management's measure of segment profit as permitted under FAS 131, Disclosures about Segments of an Enterprise and Related Information. Our management, including our chief executive officer who is our chief operating decision maker, considers Segment OCF as an important indicator of the operational strength and performance of our segments. Segment OCF excludes the impact of certain costs and expenses that do not directly affect our cash flows. Other charges, including restructuring charges, are also excluded from Segment OCF as management believes they are not characteristic of our underlying business operations. The business segments disclosed in the consolidated financial statements are based on this organizational structure and information reviewed by our management to evaluate the business segment results.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 11—Industry Segments (Continued)

        Segment information for the three and six month periods ended June 30, 2008 and 2007 was as follows (in millions):

 

 

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 11—Industry Segments (Continued)

 

Note 12—Condensed Consolidated Financial Information

        On April 13, 2004, our wholly owned subsidiary, Virgin Media Finance PLC, or 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, €225 million aggregate principal amount of 8.75% senior notes due 2014 and $100 million aggregate principal amount of floating rate notes due 2012, together referred to as the Senior Notes due 2014. On July 15, 2005, the $100 million aggregate principal amount of floating rate notes was redeemed. On July 25, 2006, Virgin Media Finance issued $550 million aggregate principal amount of 9.125% senior notes due 2016, and together with the Senior Notes due 2014, these are referred to as the Senior Notes. 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. Virgin Media Investment Holdings Limited, or VMIH, has guaranteed the Senior Notes on a senior subordinated basis.

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Condensed Consolidated Financial Information (Continued)

        We present the following condensed consolidated financial information as of June 30, 2008 and December 31, 2007 and for the three and six months ended June 30, 2008 and 2007 as required by Article 3-10(d) of Regulation S-X.

 

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Condensed Consolidated Financial Information (Continued)

 

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Condensed Consolidated Financial Information (Continued)

 

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Condensed Consolidated Financial Information (Continued)

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VIRGIN MEDIA INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Condensed Consolidated Financial Information (Continued)

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

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Note:    The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date.

See accompanying notes.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited) (in millions)

See accompanying notes.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

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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., or Virgin Media.

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. For further information, refer to the consolidated financial statements and notes thereto included in Virgin Media's Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 29, 2008, as amended.

        Certain prior year balances have been reclassified to conform to the current period presentation.

Note 2—Goodwill and Intangible Assets

        During the six months ended June 30, 2008, assets not subject to amortization were adjusted for the following (in millions):

        As at June 30, 2008, we performed our annual impairment review of the goodwill recognized in the Virgin Media TV and sit-up reporting units, included in our Content segment, and the Virgin Mobile reporting unit. The fair value of these reporting units were determined through the use of a combination of both the market and income valuation approaches to calculate fair value. We concluded that the fair value of the Virgin Media TV and sit-up reporting units exceeded their carrying value, while the Virgin Mobile reporting unit fair value was less than its carrying value.

        The market approach valuations in respect of the Mobile reporting unit have declined from the prior year primarily as a result of declining market multiples of comparable companies. The income approach valuations in respect of the 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. As a result, we extended our review to include the valuation of the Virgin Mobile reporting unit's individual assets and liabilities and have recognized a preliminary goodwill impairment charge of £366.2 million. We intend to complete our impairment review during the third quarter and any further adjustments to the carrying value of goodwill, if required, will be recognized in our third quarter results.

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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 consists of (in millions):

        The effective interest rate on the senior credit facility was 7.4% and 7.8% as at June 30, 2008 and December 31, 2007, respectively.

Note 4—Employee Benefit Plans

        The components of net periodic pension cost in the three and six months ended June 30, 2008 and 2007 were as follows (in millions):

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 5—Other (Income) Charges Including Restructuring Charges

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

 

        Other income of £1.7 million and other charges of £2.7 million for the three months ended June 30, 2008 and 2007, respectively, and other charges of £2.8 million and £13.3 million for the six months ended June 30, 2008 and 2007, respectively, relate mainly to lease exit and employee termination costs as a result of our acquisition-related restructuring programs.

Note 6—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 June 30, 2008, certain of our employees participated in the stock-based compensation plans of Virgin Media, as described in Virgin Media's 2007 Annual Report on Form 10-K, filed with the SEC on February 29, 2008, as amended.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 7—Comprehensive Loss

        Comprehensive loss comprises (in millions):

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

Note 8—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. generally accepted accounting principles, 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.

        For the three and six months ended June 30, 2008, income tax benefit was £3.9 and £13.5 million, respectively, as compared with income tax expense of £2.5 million and £3.2 million for the same periods in 2007. The income tax benefit for the three months ended June 30, 2008 was comprised of deferred federal tax expense of £1.1 million, a U.K. current tax benefit of £1.2 million and a U.K. deferred tax benefit of £3.8 million. The income tax benefit for the six months ended June 30, 2008 was comprised of deferred federal tax expense of £2.3 million, a U.K. current tax benefit of £2.5 million and a U.K. deferred tax benefit of £13.3 million. The U.K. current tax benefit related to amounts receivable in

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 8—Income Taxes (Continued)

respect of the sale of tax losses to an equity-method investee. The U.K. deferred tax benefit related to the decrease in our deferred tax asset valuation allowance due to changes in our assessment of the future realization of certain deferred tax assets. Such changes resulted from the recording of certain deferred tax liabilities related to amounts recognized in the statement of other comprehensive income that are expected to reverse in future periods and will allow us to offset such amounts against certain deferred tax assets. The income tax expense for the three months ended June 30, 2007 was comprised of deferred federal tax expense of £4.3 million and a U.K. tax benefit of £1.8 million. The income tax expense for the six months ended June 30, 2007 was comprised of deferred federal tax expense of £6.3 million and a U.K. tax benefit of £3.1 million. The U.K. tax benefit relates to amounts receivable in respect of the sale of U.K. tax losses to an equity-method investee.

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

Note 9—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):

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

Note 10—Fair Value Measurements

        In September 2006, the FASB issued Statement No. 157, Fair Value Measurements, or FAS 157. FAS 157 provides guidance for using fair value to measure assets and liabilities. It also responds to investors' requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. FAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. FAS 157 is effective for certain financial instruments included in financial statements issued for fiscal years beginning after November 15, 2007 and for all other non-financial instruments for fiscal years beginning after November 15, 2008. The provisions of FAS 157 relating to certain financial instruments were required to be adopted by us in the first quarter of 2008 effective January 1, 2008. The adoption of this standard did not have a material impact on our consolidated financial statements.

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 10—Fair Value Measurements (Continued)

        FAS 157 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). FAS 157 classifies the inputs used to measure fair value into the following hierarchy:

        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 level 2 in the fair value hierarchy described above.

        The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2008 and December 31, 2007 (in millions):

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 10—Fair Value Measurements (Continued)

        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. Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes and we do not use leveraged derivative financial instruments. The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using broker quotations, or market transactions in either the listed or over-the counter markets. As such, these derivative instruments are classified within level 2 in the fair value hierarchy.

Note 11—Recent Accounting Pronouncements

        In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115, or FAS 159. FAS 159 allows companies to elect to measure certain assets and liabilities at fair value and is effective for fiscal years beginning after November 15, 2007. We did not elect to utilize the fair value option as permitted by FAS 159 for any of our assets or liabilities as at December 31, 2007.

        In December 2007, the FASB issued FAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, or FAS 160. FAS 160 establishes requirements for ownership interests in subsidiaries held by parties other than ourselves (sometimes called "minority interests") 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 noncontrolling equity investments in unconsolidated subsidiaries must be measured initially at fair value. FAS 160 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. We are currently assessing the impact of FAS 160 on our consolidated financial position and results of operations.

Note 12—Industry Segments

        Our reportable segments Cable, Content and Mobile are based on our method of internal reporting. Our primary segment is our Cable segment, which consists of the distribution of television programming to consumers and the provision of broadband and fixed line telephone services to consumers, businesses and public sector organizations on our cable network and, to a lesser extent, off our cable network. We operate our Content segment through our wholly owned subsidiaries Virgin Media TV, and sit-up, which supply television programming to the U.K. pay-television broadcasting market including our televised shopping unit sit-up tv, which markets and retails a wide variety of consumer products using an auction-based format. We operate our Mobile segment through our wholly owned subsidiary Virgin Mobile Holdings (UK) Ltd., which consists of our mobile telephony business. Our segments operate entirely in the U.K. and no one customer represents more than 5% of our overall revenue.

        Segment operating income before depreciation, amortization and other charges, which we refer to as Segment OCF, is management's measure of segment profit as permitted under FAS 131, Disclosures about Segments of an Enterprise and Related Information. Our management, including our chief

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Industry Segments (Continued)

executive officer who is our chief operating decision maker, considers Segment OCF as an important indicator of the operational strength and performance of our segments. Segment OCF excludes the impact of certain costs and expenses that do not directly affect our cash flows. Other charges, including restructuring charges, are also excluded from Segment OCF as management believes they are not characteristic of our underlying business operations. The business segments disclosed in the consolidated financial statements are based on this organizational structure and information reviewed by our management to evaluate the business segment results.

        Segment information for the three and six month periods ended June 30, 2008 and 2007 was as follows (in millions):

 

 

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12—Industry Segments (Continued)

 

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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

        Virgin Media is a leading U.K. entertainment and communications business providing the first "quad-play" offering of television, broadband, fixed line telephone and mobile telephone services in the U.K. together with one of the most advanced TV on demand services available in the U.K. market. We are one of the largest providers of residential broadband, pay television and fixed line telephone services and, by customers, the largest mobile virtual network operator in the U.K. Through ntl:Telewest Business, which also operates as part of the Virgin Media group, we provide a complete portfolio of voice, data and internet solutions to leading businesses, public sector organizations and service providers in the U.K.

        Through Virgin Media Television, or Virgin Media TV, we also provide a broad range of programming through our wholly owned channels, such as Virgin 1, Living and Bravo; through UKTV, our joint ventures with BBC Worldwide; and through the portfolio of retail television channels operated by sit-up tv.

        We presently manage our business through three reportable segments:

•

Cable:  our Cable segment includes the distribution of television programming over our cable network and the provision of broadband and fixed line telephone services to consumers, businesses and public sector organizations, both on our cable network and, to a lesser extent, off our network;



•

Mobile:  our Mobile segment includes the provision of mobile telephone services under the brand name Virgin Mobile to consumers over cellular networks owned by third parties; and



•

Content:  our Content segment includes the operations of our U.K. television channels, such as Virgin 1, which was launched on October 1, 2007, as well as Living, Bravo, and sit-up's portfolio of retail television channels. 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 six months ended June 30, 2008 and 2007 was as follows (in millions):

        For further discussion of our business, please refer to our Annual Report on Form 10-K for the year ended December 31, 2007 as filed with the SEC on February 29, 2008, as amended.

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Factors Affecting Our Business

Cable Segment

        In our Cable segment, residential customers account for the majority of our total revenue. The number of residential 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. For example, 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. Our packaging of services and our pricing are designed to encourage our customers to use multiple services such as television, telephone and broadband at a lower price than each stand-alone product on a combined basis. Factors particularly affecting our profitability include customer churn, average revenue per user, or ARPU, competition, capital expenditures and seasonality.

         Customer Churn.    Customer churn is a measure of the number of customers who stop subscribing to our services. An increase in our customer 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 customer churn rate. Our ability to reduce our customer churn rate beyond a base level is limited by factors like competition and customers moving outside our network service area, in particular during the summer season. Managing our customer churn rate is a significant component of our business plan. Our customer churn rate may increase if our customer service is seen as unsatisfactory, if we are unable to deliver our services over our network without interruption, or if we fail to match offerings by our competitors.

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

         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, and 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, digital terrestrial television offered through Freeview, internet protocol television offered by Tiscali S.p.A. and BT, and mobile telephone, television and data services offered by other mobile telephone operators. Our business services also face a range of competitors, including BT and Cable & Wireless. Certain competitors, such as BT and BSkyB, 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.

         Capital Expenditures.    Our business requires substantial capital expenditures on a continuing basis for various purposes, including expanding, maintaining and upgrading our 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.

         Seasonality.    Some revenue streams are subject to seasonal factors. For example, telephone usage revenue by residential customers and businesses tends to be slightly lower during summer holiday

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months. Our customer 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.

Mobile Segment

        Factors particularly affecting our Mobile segment include competition, seasonality and our third party distribution arrangements.

         Competition.    Our ability to acquire and retain customers and increase revenue depends on our competitive strength. There is significant competition in our markets from mobile operators, including O2, Vodafone, Orange, T-Mobile and 3, and from other mobile virtual network operators, including Tesco Mobile, BT Mobile and Carphone Warehouse. Many of our competitors are part of large multinational organizations, have substantial advertising and marketing budgets, and have a significant retail presence. If competitive forces prevent us from charging the prices for these services that we plan to charge, or if our competition is able to attract our customers or potential customers we are targeting, our results of operations will be adversely affected.

         Seasonality.    Some revenue streams and cost drivers are subject to seasonal factors. For example, in the fourth quarter of each year our customer acquisition and retention costs typically increase due to the Christmas holiday period. Our 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. During the summer holiday months, roaming revenue is generally higher as a result of increased international travel.

         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 customers or retain existing customers may be adversely affected. We also distribute our products through our own retail outlets.

Content Segment

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

         Competition.    Our television channels compete with other broadcasters for advertising revenues, subscription revenues, and programming rights. sit-up competes with a large variety of retailers in the U.K. market and with other television channels for audiences. IDS, our advertising sales department, competes with advertising sales operations representing other television broadcasters.

         Limited Number of Buyers.    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 programming.

         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. Also, sit-up records increased revenues and costs in the fourth quarter due to generally higher retail sales in the lead up to the Christmas holiday.

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         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., the viewing levels for its channels and the proportion of the U.K. advertising market represented by IDS.

General

        Other factors affecting our business include:

         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 implemented a hedging program to mitigate the risk from these exposures. The objective of this program is to reduce the volatility of our cash flows and earnings caused by changes in underlying currency exchange rates.

         Integration.    We continue to integrate our business with Virgin Mobile. We will be completing the final stages of the integration of our cable billing platforms during 2008 and are continuing to integrate certain of the operations of Virgin Mobile. Any issues that may arise in connection with these integration activities could have a material negative effect on our financial performance.

         General Macroeconomic Factors.    General macroeconomic factors in the U.K. may have an impact on our business. For example, in our Cable segment, as consumers generally have less discretionary spending to purchase goods and services during an economic slowdown, consumers may be less willing to subscribe to additional products or upgrade their existing services and our bad debt experience may worsen. In addition, as expenditures by advertisers are sensitive to economic conditions and tend to decline in recessionary periods and other periods of uncertainty, a slowing economy may be accompanied by a decrease in advertising revenues generated through our television programming and broadband internet platforms. Finally, in our Mobile segment, customers may reduce their expenditures on mobile phones and usage in a slowing economy.

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 Annual Report on Form 10-K for the year ended December 31, 2007 as filed with the SEC on February 29, 2008, as amended.

Consolidated Results of Operations

Consolidated Results of Operations for the Three and Six Months Ended June 30, 2008 and 2007

Revenue

        For the three months ended June 30, 2008, revenue decreased by 0.5% to £990.5 million from £995.0 million for the three months ended June 30, 2007. This decrease was primarily due to lower revenue in our Cable and Mobile segments driven by declining prices due to increased competition,

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partially offset by an increase in revenue in our Content segment. See further discussion of our Cable, Mobile and Content segments below.

        For the six months ended June 30, 2008, revenue decreased by 1.2% to £1,992.3 million from £2,016.9 million for the six months ended June 30, 2007. This decrease was primarily due to a decline in revenue in our Cable and Mobile segments driven by declining prices due to increased competition, partially offset by an increase in revenue in our Content segment. See further discussion of our Cable, Mobile and Content segments below.

Expenses

         Operating costs:    For the three months ended June 30, 2008, operating costs, including network expenses, were relatively unchanged at £434.9 million compared to £435.1 million during the same period in 2007. This slight decrease was primarily attributable to decreased operating costs in our Cable and Mobile segments partially offset by increased operating costs in our Content segment. Operating costs as a percentage of revenue increased to 43.9% for the three months ended June 30, 2008, from 43.7% for the same period in 2007. Lower network costs in our Cable segment and reduced equipment and interconnect costs in our Mobile segment were partially offset by increased programming costs in our Content segment following the launch of our new Virgin 1 channel.

        For the six months ended June 30, 2008, operating costs increased by 1.2% to £895.3 million from £884.4 million during the same period in 2007. This increase was primarily attributable to increased operating costs in our Content and Mobile segments partially offset by decreased operating costs in our Cable segment. Operating costs as a percentage of revenue increased to 44.9% for the six months ended June 30, 2008, from 43.8% for the same period in 2007 due to increased programming costs in our Content segment following the launch of our new Virgin 1 channel, and increased costs relating to higher handset volumes along with increased interconnect costs in our Mobile segment, partially offset by lower employee, facilities and network costs in our Cable segment.

         Selling, general and administrative expenses:    For the three months ended June 30, 2008, selling, general and administrative expenses decreased by 9.0% to £222.7 million from £244.6 million for the three months ended June 30, 2007. This decrease is primarily due to lower employee related costs partially offset by higher professional fees and regulatory costs.

        For the six months ended June 30, 2008, selling, general and administrative expenses decreased by 14.0% to £439.9 million from £511.5 million for the six months ended June 30, 2007. This decrease was primarily attributable to a reduction in costs in relation to marketing and our rebrand to Virgin Media in 2007 along with lower employee related costs, including reduced share based compensation expense, partially offset by higher professional fees and regulatory expenses.

Other (income) charges

        Other income was £1.7 million for the three months ended June 30, 2008 and a charge of £2.9 million for the six months ended June 30, 2008. The benefit recognized in the three months ended June 30, 2008 related principally to revisions in cashflow estimates resulting from the sublease of a vacant property. Other charges for the six months ended June 30, 2008 related primarily to an increase in our accrual for lease exit costs in relation to changes in U.K. property tax rates which was partially offset by decreases as a result of the surrender or sublease of a number of properties.

        Other charges of £3.1 million for the three months ended June 30, 2007 and £14.7 million for the six months ended June 30, 2007 related primarily to lease exit costs and employee termination costs in connection with our restructuring programs initiated in respect of the reverse acquisition of Telewest. In the three months ended June 30, 2007, employee termination costs of £4.3 million were partially offset by a revision in the cash flow estimates for lease exit costs of £1.2 million resulting primarily from the sublease of one our vacant properties.

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Depreciation expense

        For the three months ended June 30, 2008, depreciation expense was relatively unchanged at £230.2 million as compared to £231.6 million for the three months ended June 30, 2007. For the six months ended June 30, 2008, depreciation expense was relatively unchanged at £461.7 million as compared to £463.7 million for the six months ended June 30, 2007.

Amortization expense

        For the three months ended June 30, 2008, amortization expense decreased to £71.3 million from £77.6 million for the three months ended June 30, 2007. Amortization expense decreased as a result of the cessation of amortization of certain intangible assets that became fully amortized during the period, partially offset by an increased expense related to the reduction in the remaining useful economic lives of certain intangible assets effective from January 1, 2008.

        For the six months ended June 30, 2008, amortization expense increased to £164.0 million from £154.9 million for the six months ended June 30, 2007. The increase in amortization expense related to the reduction in the remaining useful economic lives of certain intangible assets effective from January 1, 2008, partially offset by a decreased expense as a result of the final amortization of certain intangible assets.

Goodwill impairment

        During the quarter we performed our annual impairment review for our Mobile, Virgin Media TV and sit-up reporting units. As a result of this review we concluded that the fair value of the Virgin Media TV and sit-up reporting units exceeded their carrying value, while the Mobile reporting unit's fair value was less than its carrying value. The fair value of the 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 Mobile reporting unit have declined from the prior year primarily as a result of declining market multiples of comparable companies. The income approach valuations in respect of the 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 have completed our preliminary valuation of the individual assets and liabilities within the Mobile reporting unit and recognized a preliminary goodwill impairment charge of £366.2 million in the quarter. We intend to complete our impairment review during the third quarter and any further adjustments to the carrying value of goodwill, if required, will be recognized in our third quarter results.

Interest income and other, net

        For the three and six months ended June 30, 2008, interest income and other decreased to £7.6 million and £13.9 million from £7.8 million and £14.8 million for the three and six months ended June 30, 2007, respectively, primarily as a result of lower deposit rates in 2008 and a gain on disposal of investments that was recognized in the prior year.

Interest expense

        For the three months ended June 30, 2008, interest expense decreased to £121.6 million from £128.1 million for the three months ended June 30, 2007, primarily as a result of reductions in certain loan obligations following voluntary repayments in December 2007 and April 2008, partially offset by interest on the new convertible senior notes.

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        We paid cash interest of £121.4 million for the three months ended June 30, 2008, and £140.0 million for the three months ended June 30, 2007. The decrease in cash interest payments was primarily due to differences in the timing of interest payments with respect to our senior credit facility.

        For the six months ended June 30, 2008, interest expense decreased to £245.0 million from £246.6 million for the six months ended June 30, 2007, primarily as a result of reductions in certain loan obligations following the voluntary prepayments noted above, offset by the impact of higher interest rates on the unhedged portion of our loan obligations and interest on the new convertible senior notes which funded the repayment of higher cost bank debt.

        We paid cash interest of £263.5 million for the six months ended June 30, 2008, and £295.0 million for the six months ended June 30, 2007. The decrease in cash interest payments was primarily as a result of changes in timing of interest payments.

Foreign currency gains (losses)

        The foreign currency gains of £3.4 million in the three months ended June 30, 2008 were largely comprised of unrealized gains resulting from favorable exchange movements on our euro denominated debt. The foreign currency gains of £2.3 million in the three months ended June 30, 2007 were largely comprised of gains resulting from favorable exchange rate movements, principally on dollar settlements.

        The foreign currency losses of £25.0 million in the six months ended June 30, 2008 were largely comprised of unrealized losses resulting from unfavorable exchange movements on our euro denominated debt. The foreign currency gains of £5.6 million in the six months ended June 30, 2007 were largely comprised of gains resulting from favorable exchange rate movements, principally on dollar settlements.

Loss on extinguishment of debt

        The loss on extinguishment of debt of £5.6 million in the three and six months ended June 30, 2008 related to the write-off of deferred financing costs resulting from the repayment of £504.0 million of our senior credit facility with the proceeds of the new convertible senior notes and cash on hand.

(Losses) gains on derivative instruments

        Losses on derivative instruments of £2.3 million in the three months ended June 30, 2008 mainly related to unfavorable mark to market changes in the valuation of euro denominated derivative instruments that are not designated as accounting hedges. The losses on derivative instruments of £1.0 million in the three months ended June 30, 2007 mainly related to unfavorable movements in the fair value of sterling interest rate swaps not designated as accounting hedges.

        Gains on derivative instruments of £31.1 million in the six months ended June 30, 2008 mainly related to the recognition of favorable mark to market changes in the valuation of euro denominated derivative instruments that are not designated as accounting hedges. The losses on derivative instruments of £1.5 million in the six months ended June 30, 2007 mainly related to unfavorable movements in the fair value of sterling interest rate swaps not designated as accounting hedges.

Income tax benefit (expense)

        For the three months ended June 30, 2008, there was an income tax benefit of £0.6 million as compared with an income tax expense of £7.2 million for the same period in 2007. The income tax benefit for the three months ended June 30, 2008 was comprised of current federal tax expense of £0.2 million, deferred federal tax expense of £4.2 million, a U.K. current tax benefit of £1.2 million and a U.K. deferred tax benefit of £3.8 million. The income tax expense for the three months ended June 30, 2007 was comprised of current federal taxes of £0.4 million, deferred federal tax expense of £

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8.6 million and a U.K. tax benefit of £1.8 million. The U.K. 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 related to the decrease in our deferred tax asset valuation allowance due to changes in our assessment of the future realization of certain deferred tax assets. Such changes resulted from the recording of certain deferred tax liabilities related to amounts recognized in the statement of other comprehensive income during the quarter that are expected to reverse in future periods and will allow us to offset such amounts against certain deferred tax assets.

        For the six months ended June 30, 2008, there was an income tax benefit of £7.9 million as compared with an income tax expense of £10.7 million for the same period in 2007. The income tax benefit for the six months ended June 30, 2008 was comprised of current federal tax expense of £0.4 million, deferred federal tax expense of £7.5 million, a U.K. current tax benefit of £2.5 million and a U.K. deferred tax benefit of £13.3 million. The income tax expense for the six months ended June 30, 2007 was comprised of current federal taxes of £0.7 million, a U.S. state and local tax benefit of £0.6 million, deferred federal tax expense of £13.7 million and a U.K. tax benefit of £3.1 million. The U.K. 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 related to the decrease in our deferred tax asset valuation allowance due to changes in our assessment of the future realization of certain deferred tax assets. Such changes resulted from the recording of certain deferred tax liabilities related to amounts recognized in the statement of other comprehensive income during the six month period that are expected to reverse in future periods and will allow us to offset such amounts against certain deferred tax assets.

Net loss

        For the three months ended June 30, 2008, net loss increased to £447.2 million compared with a net loss of £119.0 million for the same period in 2007 due primarily to the goodwill impairment charge as discussed above.

        For the six months ended June 30, 2008, net loss increased to £551.6 million compared with a net loss of £239.3 million for the same period in 2007 due primarily to the goodwill impairment charge as discussed above.

Net loss per share

        Basic and diluted net loss per common share for the three months ended June 30, 2008 was £1.36 compared to £0.37 for the three months ended June 30, 2007. Basic and diluted net loss per share is computed using a weighted average of 328.1 million shares outstanding in the three months ended June 30, 2008 and a weighted average of 325.5 million shares outstanding for the same period in 2007. Options, warrants, shares issuable under the convertible senior notes and shares of restricted stock held in escrow outstanding at June 30, 2008 and June 30, 2007 are excluded from the calculation of diluted net loss per share, since these securities are anti-dilutive.

        Basic and diluted net loss per common share for the six months ended June 30, 2008 was £1.68 compared to £0.74 for the six months ended June 30, 2007. Basic and diluted net loss per share is computed using a weighted average of 328.0 million shares outstanding in the six months ended June 30, 2008 and a weighted average of 324.8 million shares outstanding for the same period in 2007. Options, warrants, shares issuable under the convertible senior notes and shares of restricted stock held in escrow outstanding at June 30, 2008 and June 30, 2007 are excluded from the calculation of diluted net loss per share, since these securities are anti-dilutive.

Segment Results of Operations for the Three and Six Months Ended June 30, 2008 and 2007

        A description of the products and services, as well as year-to-date financial data, for each segment can be found in note 11 to Virgin Media's condensed consolidated financial statements.

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        The reportable segments disclosed in this Form 10-Q are based on our management organizational structure as of June 30, 2008. Future changes to this organizational structure may result in changes to the reportable segments disclosed.

        Segment operating income before depreciation, amortization and other charges, which we refer to as Segment OCF, is management's measure of segment profit as permitted under FAS 131, Disclosures about Segments of an Enterprise and Related Information. Our management, including our chief executive officer who is our chief operating decision maker, considers Segment OCF as an important indicator of the operational strength and performance of our segments. Segment OCF excludes the impact of costs and expenses that do not directly affect our cash flows. Other charges, including restructuring charges, are also excluded from Segment OCF as management believes they are not characteristic of our underlying business operations.

Cable Segment

        The summary combined results of operations of our Cable segment for the three and six months ended June 30, 2008 and 2007 were as follows (in millions):

Revenue

        Our Cable segment revenue by customer type for the three and six months ended June 30, 2008 and 2007 was as follows (in millions):

         Consumer:    For the three months ended June 30, 2008, revenue from residential customers decreased by 1.5% to £610.3 million from revenue of £619.3 million for the three months ended June 30, 2007. For the six months ended June 30, 2008, revenue from residential customers decreased by 2.2% to £1,228.5 million from £1,256.6 million for the six months ended June 30, 2007. These decreases were primarily due to higher price discounting to stimulate customer activity and retention in light of competitive factors in the marketplace, particularly relating to steps taken to increase the alignment of the prices paid by our existing customers with the prices paid by new customers. Partially offsetting these decreases were increases in revenue from selective telephony price rises as well as from additional customers subscribing to our telephone, broadband and television services.

        Cable ARPU decreased to £41.63 for the three months ended June 30, 2008 from £42.16 for the three months ended June 30, 2007. The decrease in Cable ARPU was primarily due to lower telephony usage and higher price discounting as discussed above. The decline has been mitigated by our focus on acquiring new bundled customers and cross-selling and up-selling to existing customers. Our focus on

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acquiring new bundled customers and on cross-selling to existing customers is shown by Cable Revenue Generating Units, or Cable RGUs, per customer increasing to 2.36 at June 30, 2008 from 2.23 at June 30, 2007 and by triple-play penetration growing to 53.1% at June 30, 2008 from 45.2% at June 30, 2007. A triple-play customer is a customer who subscribes to our television, broadband and fixed line telephone services.

         Business:    Revenue from our business customers for the three and six months ended June 30, 2008 and 2007 was comprised of (in millions):

        For the three months ended June 30, 2008, revenue from business customers increased slightly by 0.6% to £156.8 million from £155.8 million for the three months ended June 30, 2007. For the six months ended June 30, 2008, revenue from business customers decreased slightly by 0.4% to £317.5 million from £318.8 million for the six months ended June 30, 2007. The increase in the three months ended June 30, 2008 was attributable to growth in retail data and other revenues, partially offset by declines in wholesale and retail telephony voice revenues. The decrease in the six months ended June 30, 2008 was attributable to declines in wholesale and retail telephony voice revenues, partially offset by growth in retail data and other revenues. Retail data revenues represented 41.8% and 40.7% of the retail business revenues for the three and six months ended June 30, 2008 compared with 39.0% and 37.8% for the three and six months ended June 30, 2007, respectively.

        Other retail revenue in the three and six months ended June 30, 2008 was £17.5 million and £36.1 million compared to £13.3 million and £28.2 million in the three and six months ended June 30, 2007, respectively. The majority of this revenue is from infrastructure projects which are non-recurring in nature. Our largest infrastructure project is the provision of telecoms network equipment for Heathrow airport's new Terminal 5 which contributed £6.4 million and £16.1 million of revenue in the three and six months ended June 30, 2008 compared to £6.0 million and £10.7 million in the same periods last year, respectively.

Cable Segment OCF

        For the three months ended June 30, 2008, Cable segment OCF increased to £298.3 million from £282.5 million for the three months ended June 30, 2007. Lower consumer revenue and lower direct operating costs in respect of our television and telephone services were partially offset by increased broadband revenues. Savings in the three months ended June 30, 2008 were made in selling, general and administrative expenses particularly in respect of lower employee related costs, including share based compensation expense, due to reduced headcount, partially offset by higher professional and other regulatory costs.

        For the six months ended June 30, 2008, Cable segment OCF increased to £600.2 million from £549.3 million for the six months ended June 30, 2007. This increase is partly due to lower selling, general and administrative expenses as a result of a reduction in costs in relation to marketing after our rebrand to Virgin Media in 2007 along with lower employee related costs, including reduced share

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based compensation expense, together with lower direct operating costs as a result of lower revenues. Partially offsetting these savings was lower consumer revenue, primarily as a result of higher price discounting and lower telephony usage, together with the slight decline in revenue from business customers, as described above.

Summary Cable Statistics

        Selected statistics for our residential cable customers, excluding customers off our cable network and Virgin Mobile customers, for the three months ended June 30, 2008 as well as the four prior quarters, are set forth in the table below. Our net customer movement for the three months ended June 30, 2008 was a reduction of 19,500 customers being the net of gross additions and disconnections (net additions) together with a reduction of 18,900 customers with respect to data cleanse activity following the migration of our final on-net residential billing system during the quarter. The reduction in net additions was primarily the result of fewer gross additions due in part to the softer macroeconomic environment. Customer churn fell during recent periods, particularly in the three months ended December 31, 2007, March 31, 2008 and June 30, 2008 during which our average monthly churn was 1.4%, 1.2% and 1.3%, respectively. The total number of Cable RGUs grew to 11,165,700 at June 30, 2008 from 10,582,300 at June 30, 2007, representing a net increase in RGUs of 583,400. Our net customer movement during the three months ended June 30, 2007 was a reduction of 70,300 customers, partly as a result of the increased competition in the marketplace together with the removal of BSkyB's basic channels from our platform.

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(1)

Data cleanse activity with respect to the second quarter of 2008 resulted in a decrease in reported customer numbers of 18,900 and an increase in reported RGUs of 5,300, comprised of an increase of approximately 6,500 Broadband RGUs and decreases of approximately 300 Telephone and 900 Television RGUs. These figures include a 4,600 decrease in reported customer numbers and a 9,200 decrease in reported RGUs relating to data cleanse activity in July 2008. The data cleanse activity is continuing in the third quarter of 2008 and may result in further adjustments to customer and RGU numbers.

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Data cleanse activity in the second quarter of 2007 did not result in a change in reported customer numbers but did result in an increase in reported RGUs of 4,200 comprised of an increase of approximately 4,400 Television and 100 Telephone RGUs and a decrease of approximately 300 Broadband 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)

The monthly cable average revenue per user, or Cable 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 Cable ARPU, we have spread the data cleanse evenly over the three months of the quarter in which the data cleanse has been recognized.

        Selected statistics for our residential customers that are not connected directly through our cable network are set forth in the table below.

        Total RGUs for our residential customers that are not connected directly through our cable network declined by 1,900 during the three months ended June 30, 2008 as compared to an increase of 15,100 RGUs in the three months ended June 30, 2007. The decline in RGUs in the current quarter is partially due to the migration of the billing systems supporting these customers which has delayed the introduction of new offerings in an increasingly competitive market.

Mobile Segment

        The summary combined results of operations of our Mobile segment for the three and six months ended June 30, 2008 and 2007 were as follows (in millions):

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Revenue

        Our Mobile segment revenue for the three and six months ended June 30, 2008 and 2007 was comprised of (in millions):

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(1)

Equipment revenue is stated net of discounts earned through service usage.

        For the three months ended June 30, 2008, revenue decreased to £143.9 million from £146.3 million for the three months ended June 30, 2007. The decrease was primarily attributable to lower prepay revenues as a result of lower volumes, and lower Mobile ARPU, partially offset by increased contract revenues driven mainly by higher contract volumes.

        For the six months ended June 30, 2008, revenue decreased to £283.4 million from £287.3 million for the six months ended June 30, 2007. The decrease was primarily attributable to lower prepay revenues as a result of lower volumes, and lower Mobile ARPU, partially offset by increased contract revenues driven mainly by higher contract volumes.

        Mobile ARPU decreased slightly to £10.65 for the three months ended June 30, 2008 from £10.70 for the three months ended June 30, 2007. The decrease was primarily due to lower prepay usage and reduced prices on our contract offerings.

Mobile Segment OCF

        For the three months ended June 30, 2008, Mobile segment OCF was £35.5 million compared with £32.7 million for the three months ended June 30, 2007. This increase was due primarily to a reduction in interconnect costs as a result of renegotiated terms with our mobile network provider, T-Mobile. We have agreed new terms with our mobile network provider which reduce the wholesale rates we pay for voice and data traffic, retroactive to January 1, 2008 for voice and to April 1, 2008 for data. We have also agreed new data pricing rates that will allow us to launch a complementary mobile broadband proposition in the fourth quarter and to price more competitively in the growing mobile data usage market which will be more attractive for higher value customers. We have also committed to purchasing our current core voice, text and handset data and mobile broadband data card services exclusively from T-Mobile for a three year period commencing April 1, 2008.

        For the six months ended June 30, 2008, Mobile segment OCF was £52.7 million compared with £59.4 million for the six months ended June 30, 2007. This decrease was due primarily to lower revenue from prepay customers together with increased equipment cost of sales, interconnect costs and costs of network usage, partially offset by lower operating costs and employee expenses.

Summary Mobile Statistics

        Selected statistics for Virgin Mobile are set forth in the table below. Between June 30, 2008 and June 30, 2007, the number of mobile customers decreased by a net 126,000. Contract customer gains of 192,500 were offset by net losses of 318,500 prepay customers. The growth in contract customers

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reflects the drive for "quad-play" packages through cross-selling with our Cable segment products. The decline in prepay customers reflects increased competition in the prepay market.

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(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 90 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.

(2)

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 for the period, divided by three.

Content Segment

        The summary combined results of operations of our Content segment for the three and six months ended June 30, 2008 and 2007 were as follows (in millions):

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Revenue

        Our Content segment revenue, excluding inter segment revenue, for the three and six months ended June 30, 2008 and 2007 was as follows (in millions):

        For the three months ended June 30, 2008, revenue in the Content segment increased by 8.0% to £79.5 million from £73.6 million for the three months ended June 30, 2007. For the six months ended June 30, 2008, revenue increased by 5.6% to £162.9 million from £154.2 million for the six months ended June 30, 2007. These increases were driven primarily by increased retail revenue from our sit-up television channels together with increased advertising revenues from Virgin Media TV, partially offset by the loss of revenue in Virgin Media TV from our program rights licensing business which was disposed of in July 2007.

Content Segment OCF

        For the three months ended June 30, 2008, Content segment OCF decreased to a loss of £0.9 million from income of £0.1 million for the three months ended June 30, 2007. This decrease is mainly due to higher programming and other direct costs and the timing of marketing campaigns, partially offset by an increase in revenues.

        For the six months ended June 30, 2008, Content segment OCF decreased to £4.2 million from £12.3 million for the six months ended June 30, 2007. This decrease is mainly due to an increase in Virgin Media TV programming and marketing costs together with the non recurrence in 2008 of an accrual reversal of £7.9 million relating to the settlement of a long-running legal claim in 2007.

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 £5.0 million and £11.2 million for the three and six months ended June 30, 2008, and £5.4 million and £12.5 million for the three and six months ended June 30, 2007, respectively. At June 30, 2008, our investment in UKTV was carried on the balance sheet at £374.3 million, which includes an outstanding loan totaling £144.9 million.

        UKTV receives financing through loans from Virgin Media, which totaled £144.9 million at June 30, 2008. These loans effectively act as a revolving facility for UKTV. We received net cash payments from UKTV in the form of loan capital repayments of £5.4 million and £0.5 million for the three and six months ended June 30, 2008. We received dividends, interest payments and payment for consortium tax relief from UKTV totaling £3.9 million and £9.8 million during the three and six months ended June 30, 2008, respectively.

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        Additionally, we recorded a loss of £1.1 million and £2.2 million in the three months and six months ended June 30, 2008, respectively, from our investment in our joint venture with Setanta Sports News.

Liquidity and Capital Resources

        As of June 30, 2008, we had £6,023.5 million of debt outstanding, compared to £5,958.5 million as of December 31, 2007, and £6,093.2 million as of June 30, 2007, and £426.8 million of cash and cash equivalents, compared to £321.4 million as of December 31, 2007 and £277.1 million as of June 30, 2007. The decrease in debt since June 30, 2007 was primarily attributable to a voluntary prepayment of £200 million in December 2007 utilizing cash reserves, partially offset by exchange rate movements on our debt denominated in currencies other than the pound sterling together with a greater use of finance leases. The increase in debt since the year end is primarily the result of changes in foreign exchange rates together with a greater use of finance leases.

        As discussed in greater detail below, on April 16, 2008 we issued $1.0 billion of 6.5% convertible senior notes due 2016 and used the net proceeds and cash on hand to repay £504.0 million of our obligations under our senior credit facility that were originally scheduled to be paid in 2009, 2010 and 2012.

        Our business is capital intensive and we are highly leveraged. We have significant cash requirements for operating cost, capital expenditure, interest expense and debt amortization. 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, offer new services and integrate our billing systems and customer databases. We expect that our cash on hand, together with cash from operations and our undrawn credit facility, will be sufficient for our cash requirements through the next twelve months. However, our cash requirements after the next twelve months may exceed these sources of cash. For instance, debt amortization repayments under our senior credit facility increase significantly in 2010. We believe that we will need to address these scheduled principal payments in part through means other than reliance on cash flow from operations, such as raising additional debt or equity, refinancing our existing facility, possible asset sales, or 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.

        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 to 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.

Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2008 and 2007

        For the six months ended June 30, 2008, cash provided by operating activities increased to £378.8 million from £221.1 million for the six months ended June 30, 2007. This increase was primarily attributable to improved operating results and working capital movements together with reduced cash interest payments. For the six months ended June 30, 2008, cash paid for interest, exclusive of amounts

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capitalized, decreased to £263.5 million from £295.0 million during the same period in 2007. This decrease was primarily as a result of changes in timing of interest payments.

        For the six months ended June 30, 2008, cash used in investing activities was £231.1 million compared with cash used in investing activities of £278.9 million for the six months ended June 30, 2007. The cash used in investing activities in the six months ended June 30, 2008 mainly represented purchases of fixed assets. Purchases of fixed and intangible assets decreased to £233.3 million for the six months ended June 30, 2008 from £286.2 million for the same period in 2007 primarily because of the timing of fixed asset purchases along with a greater use of finance leases.

        Cash used in financing activities for the six months ended June 30, 2008 was £42.4 million compared to £81.2 million for the six months ended June 30, 2007. Cash used in financing activities for the six months ended June 30, 2008 was primarily principal repayments on long-term debt and capital leases totaling £523.7 million offset by new borrowings under the convertible senior notes, net of financing fees, of £494.0 million. Cash used in financing activities for the six months ended June 30, 2007 was primarily principal payments on long-term debt and capital leases of £951.4 million, partially offset by new borrowings, net of financing fees, of £874.5 million.

Long Term Debt

Senior Credit Facility

        During 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 Tranche B6 term loan facility. We used the net proceeds to repay some of our obligations under the Tranche A and Tranche A1 term loan facilities. In April 2007, we also amended our senior credit facility to among other things, (i) enable us to issue this £890 million of additional indebtedness, (ii) relax certain of our financial covenants, and (iii) provide us with additional flexibility, including permitting our Board of Directors, if they so determine, to pay increased levels of dividends on our common stock.

        At June 30, 2008, the principal payments on our senior credit facility are scheduled as follows (in millions):

        The senior credit facility (other than for Tranche C) has the benefit of a full and unconditional senior secured guarantee from Virgin Media Finance PLC as well as first priority pledges of the shares and assets of substantially all of the operating subsidiaries of Virgin Media Investment Holdings Limited, or VMIH, and of receivables arising under any intercompany loans to those subsidiaries. The senior secured guarantee of Virgin Media Finance PLC is secured by a first priority pledge of the

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entire capital stock of VMIH and the receivables under any intercompany loans from Virgin Media Finance PLC to VMIH. The guarantee of Tranche C of the senior credit facility will share in the security of Virgin Media Finance PLC granted to the senior credit facility, but will receive proceeds only after the other tranches and will not benefit from guarantees or security granted by other members of the group.

        The annual rate of interest payable under our senior credit facility is the sum of (i) the London Intrabank Offer Rate (LIBOR), US LIBOR or European Intrabank Offer Rate (EURIBOR), as applicable, plus (ii) the applicable interest margin and the applicable cost of complying with any reserve requirement.

        The applicable interest margin for Tranche A, Tranche A1 and the revolving facility depends upon the net leverage ratio then in effect as set forth below:

        The applicable interest margins for Tranche B and Tranche C are as follows:

Senior Notes

        On July 25, 2006, Virgin Media Finance PLC issued U.S. dollar denominated 9.125% senior notes due 2016 with a principal amount outstanding of $550 million. The senior notes due 2016 are unsecured senior obligations of Virgin Media Finance PLC and rank pari passu with Virgin Media Finance's outstanding senior notes due 2014. The senior notes due 2016 bear interest at an annual rate of 9.125% payable on February 15 and August 15 of each year, beginning February 15, 2007. The 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 PLC issued U.S. dollar denominated 8.75% senior notes due 2014 with a principal amount outstanding of $425 million, sterling denominated 9.75% senior notes due 2014 with a principal amount outstanding of £375 million, and euro denominated 8.75% senior notes due with a principal amount outstanding of €225 million. 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.

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Convertible Senior Notes

        On April 16, 2008, Virgin Media Inc. issued U.S. dollar denominated 6.5% convertible senior notes due 2016 with a principal amount outstanding of $1.0 billion. The convertible senior notes are unsecured senior obligations of 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 our senior notes. The convertible senior notes bear interest at an annual rate of 6.5% payable semi-annually on May 15 and November 15 of each year, beginning November 15, 2008. 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.

        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. under goes 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 dividends or distributions, the issuance of certain rights or warrants, certain cash dividends or distributions or stock repurchases where the price exceeds market values. In the event of specified fundamental changes relating to Virgin Media Inc., referred to as "make whole" fundamental changes, the conversion rate will be increased as provided by a formula set forth in the indenture governing the convertible senior notes.

        Holders may also require us to repurchase the convertible senior notes for cash in the event of a fundamental change for a purchase price equal to 100% of the principal amount, plus accrued but unpaid interest to the purchase date.

Restrictions Under Our Existing Debt Agreements

        The agreements governing the senior notes and the senior credit facility significantly, and in some cases absolutely, restrict our ability and the ability of most of our subsidiaries to:

•

incur or guarantee additional indebtedness;



•

pay dividends or make other distributions, or redeem or repurchase equity interests or subordinated obligations;



•

make investments;



•

sell assets, including the capital stock of subsidiaries;



•

enter into sale and leaseback transactions or certain vendor financing arrangements;

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•

create liens;



•

enter into agreements that restrict the restricted subsidiaries' ability to pay dividends, transfer assets or make intercompany loans;



•

merge or consolidate or transfer all or substantially all of their assets; and



•

enter into transactions with affiliates.

        We are also subject to financial maintenance covenants under our senior credit facility. These covenants require us to meet financial covenants on a quarterly basis and the required levels increase over time. As a result, we will need to continue to improve our operating performance over the next several years to meet these levels. Failure to meet these covenant levels would result in a default under our senior credit facility.

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:

Cash Dividends

        During the year ended December 31, 2007 and the six months ended June 30, 2008, we paid the following dividends:

        Future payments of regular quarterly dividends by us are at the discretion of our 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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Off-Balance Sheet Arrangements

        As part of our ongoing business we have not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities frequently referred to as special purpose entities, or SPEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of June 30, 2008 we are not involved with any material unconsolidated SPEs.

Contractual Obligations and Commercial Commitments

        The following table includes aggregate information about our contractual obligations as of June 30, 2008, and the periods in which payments are due (in millions).

        On April 16, 2008, we issued convertible senior notes, and used the net proceeds to make repayments, on our senior credit facility as discussed under Liquidity and Capital Resources—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.

        There have been no material changes in the six months ending June 30, 2008 to our commercial commitments from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007 as filed with the SEC on February 29, 2008, as amended.

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 June 30, 2008, £1,272.4 million, or 21.1% of our indebtedness, was denominated in U.S. dollars and £518.5 million, or 8.6%, 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.

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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 9 to Virgin Media's condensed 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.

        The following table provides information as of June 30, 2008 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).

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ITEM 4.   CONTROLS AND PROCEDURES

(a)   Disclosure Controls and Procedures

        Our management, with the participation of our principal 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 this evaluation, our principal 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 the registrant file or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC 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 it file or submit is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b)   Changes in Internal Control Over Financial Reporting

        On March 3, 2006, we completed the reverse acquisition of Telewest and on July 4, 2006, we completed the acquisition of Virgin Mobile. As a consequence of our integration of these acquisitions, we have made and expect to make further material changes to our internal control over financial reporting this year. Other than as stated above, 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 second 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 disputes and litigation arising in the ordinary course of our business. We are also involved in various disputes and legal proceedings, none of which is a material pending legal proceeding that, exclusive of interest and costs, is anticipated to exceed 10% of our and our subsidiaries' current assets on a consolidated basis, or is otherwise reportable in response to this item.

ITEM 1A.    RISK FACTORS

        There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 29, 2008, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as filed with the SEC on May 8, 2008.

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

(a)

See our Current Report on Form 8-K as filed with the SEC on April 16, 2008, in respect of our issuance of $1.0 billion of 6.5% convertible senior notes due 2016.



(b)

None.



(c)

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

        None.

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

        Our annual meeting of stockholders was held on May 21, 2008. The following actions by stockholders were taken at the meeting:

Election of Directors

        The following nominees were elected as directors, each to hold office for a period of three years, by the votes set forth below:

        The following directors had terms continuing after the annual meeting of stockholders: Edwin M. Banks, Jeffrey D. Benjamin, Neil A. Berkett, Gordon D. McCallum and George R. Zoffinger. Subsequently, on July 8, 2008, James A. Chiddix, Andrew Cole and Steven J. Simmons were appointed to our Board.

Appointment of Ernst & Young LLP

        The appointment of Ernst & Young LLP as our independent auditor for the fiscal year ending December 31, 2008 was ratified by the votes set forth below:

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ITEM 5.    OTHER INFORMATION

        None.

ITEM 6.    EXHIBITS

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*

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.

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