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Index to Consolidated Financial Statements and Financial Statement Schedules

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

Form 10-K

Commission file number: 000-19889

South Hertfordshire United Kingdom Fund, Ltd.
(Exact name of registrant as specified in its charter)

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

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

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

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. ý

         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):

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

         The aggregate market value of the registrant's limited partnership interests held by non-affiliates as of June 30, 2009, based on a price per limited partnership interest of $65.56 which was the weighted average price at which limited partnership interests were transferred during the second fiscal quarter of 2009, was $3,732,659.

         As of March 12, 2010, there were 56,935 limited partnership interests of the registrant outstanding. There is no established public market for the registrant's limited partnership interests.

DOCUMENTS INCORPORATED BY REFERENCE
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SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
FOR THE YEAR ENDED DECEMBER 31, 2009

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Historical Structure

        We are a Colorado limited partnership that was formed in December 1991 pursuant to the public offering of our limited partnership interests for the purpose of acquiring one or more cable television/telephone systems in the U.K. Upon acquisition of our system, our primary investment objective was to obtain capital appreciation in the value of our investment in the system over the term such investment is held by us.

        We hold 66.7% of the shares of NTL (South Hertfordshire) Limited, or NTL South Herts, which is principally engaged in the development, construction, management and operation of broadband communications networks for telephone, cable television and internet services in the U.K. As a result of our ownership of 66.7% of the shares of NTL South Herts, for accounting purposes we have consolidated the results of NTL South Herts with our results. Virgin Media Inc., or Virgin Media, indirectly holds the remaining 33.3% of the shares of NTL South Herts. We are reliant on the support of Virgin Media, the indirect parent company of NTL Fawnspring Limited, our General Partner, to continue our operations as a going concern.

        The General Partner may, pursuant to our Partnership Agreement, provide consulting services to us or delegate the performance of such consulting services to Virgin Media or other affiliates. The General Partner purchased one of our partnership interests by contributing $1,000 to our capital.

        In this annual report, unless the context otherwise requires, the term "we", "us", "our" and similar terms refers to South Hertfordshire United Kingdom Fund, Ltd. and its subsidiaries.

"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:

•

our reliance on the continued support of Virgin Media;



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the lack of an established trading market for our partnership interests;



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conflicts of interest between us and Virgin Media and its affiliates;



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our reliance on a limited franchise area;



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the risks to Virgin Media's business set forth below, which are risks that we share as a result of our reliance on, and integration with, Virgin Media;



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Virgin Media's ability to compete with a range of other communications and content providers;



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the effect of technological changes on Virgin Media's business;



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Virgin Media's ability to maintain and upgrade its networks in a cost-effective and timely manner;



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possible losses in Virgin Media's revenues due to systems failures;



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Virgin Media's ability to control unauthorized access to its network;



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Virgin Media's reliance on third-party suppliers and contractors to provide necessary hardware, software or operational support;

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•

Virgin Media's continued right to use the Virgin name and logo;



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Virgin Media's ability to manage customer churn;



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general economic conditions;



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Virgin Media's ability to provide attractive programming at a reasonable cost;



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Virgin Media's ability to implement its restructuring plan successfully and realize the anticipated benefits;



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currency and interest rate fluctuations;



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Virgin Media's ability to fund debt service obligations and refinance its debt obligations;



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Virgin Media's ability to obtain additional financing in the future; and



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Virgin Media's ability to comply with restrictive covenants in its indebtedness agreements.

        These and other factors are discussed in more detail under "Risk Factors" and elsewhere in this annual report on Form 10-K. We assume no obligation to update our forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.

Summary Corporate Structure

        The following chart shows on a condensed basis the corporate structure of Virgin Media and its relationship to us as of December 31, 2009. The chart does not show Virgin Media's operating or other intermediate companies.

*

NTL Fawnspring Limited is an indirect wholly owned subsidiary of Virgin Media and is our General Partner.

**

NTL (South Hertfordshire) Limited is a U.K. corporate subsidiary owned 66.7% by us and 33.3% by Virgin Media.

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Exchange Rates

        The following table sets forth, for the periods indicated, the high, low, period average and period end noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York expressed as U.S. dollars per £1.00. The noon buying rate of the pound sterling on March 5, 2010 was $1.5115 per £1.00.

        The above rates may differ from the actual rates used in the preparation of the consolidated financial statements and other financial information appearing in this annual report. Our inclusion of these exchange rates is not meant to suggest that the pound sterling amounts actually represent these U.S. dollar amounts or that these amounts could have been converted into U.S. dollars at any particular rate, if at all.

        Unless we otherwise indicate, all U.S. dollar amounts as of December 31, 2009 are translated to U.S. dollars at an exchange rate of $1.6167 to £1.00, and all amounts disclosed for the year ended December 31, 2009 are based on an average exchange rate of $1.5653 to £1.00. All amounts disclosed as of December 31, 2008 are based on an exchange rate of $1.4619 to £1.00, and all amounts disclosed for the year ended December 31, 2008 are based on an average exchange rate of $1.8523 to £1.00. All amounts disclosed for the year ended December 31, 2007 are based on an average exchange rate of $2.0017 to £1.00. U.S. dollar amounts for any individual period within a fiscal year are determined by multiplying the pound sterling financial results for the period from January 1 to the end of the current period by the average exchange rate for the same period and subtracting from this total the U.S. dollar converted financial results for the period from January 1 to the end of the previous period of that fiscal year. The variation among the exchange rates for 2009, 2008 and 2007 has affected the U.S. dollar comparisons significantly.

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PART I

Item 1.    Business

About South Hertfordshire United Kingdom Fund, Ltd.

        We are a Colorado limited partnership that was formed in December 1991 pursuant to the public offering of our limited partnership interests for the purpose of acquiring one or more cable television/telephone systems in the U.K. Upon acquisition of our system, our primary investment objective was to obtain capital appreciation in the value of our investment in the system over the term such investment is held by us.

        We hold 66.7% of the shares of NTL (South Hertfordshire) Limited, or NTL South Herts, which is a U.K. corporate subsidiary principally engaged in the development, construction, management and operation of broadband communications networks for telephone, cable television and broadband internet services in the U.K. As a result of our ownership of 66.7% of the shares of NTL South Herts, for accounting purposes we have consolidated the results of NTL South Herts with our results. Virgin Media indirectly holds the remaining 33.3% of the shares of NTL South Herts. We are reliant on the support of Virgin Media, the ultimate parent company of NTL Fawnspring Limited, the General Partner, to continue our operations as a going concern.

        We, as well as Virgin Media, file annual, quarterly, and current reports with the Securities and Exchange Commission, or SEC. You may read and copy any materials we or Virgin Media file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also access electronically the information we file with the SEC via its website, located at www.sec.gov. Virgin Media is incorporated in the State of Delaware, United States. Its principal executive offices are located at 909 Third Avenue, Suite 2863, New York, New York 10022, United States, and its telephone number is (212) 906-8440.

About NTL South Herts

Franchise Area

        The area covered by our cable system, which we refer to as the franchise area, comprises the administrative areas in South Hertfordshire: Three Rivers, Watford and Hertsmere. The franchise area covers commuter suburbs of London, and many people who reside in the franchise area use the available fast rail and motorway services to travel to work in central London. There are approximately 95,400 homes in the franchise area, all of which are passed by our cable television/telephone network. Construction in the franchise area is complete.

Operations

        Construction of a cable television-only network in the franchise area commenced in early 1991 and integrated cable television/telephone network architecture was developed for this franchise in late 1991. Cable television services commenced in April 1992 and telephone services commenced in February 1993, following completion of the installation of a telephone switch. In January 2000, we commenced the rollout of digital cable television services within the franchise area and in 2001 we commenced broadband internet access services. As of December 31, 2009, NTL South Herts serviced 26,911 digital television subscribers, 29,646 residential telephony subscribers and 27,511 broadband internet subscribers, representing a total of 33,668 residential customers with a penetration level of 35.3% of the homes in the franchise area.

        Management control is exercised by NTL Fawnspring Limited, a U.K. corporation, which is a wholly owned indirect subsidiary of Virgin Media and is our General Partner, although management

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control is delegated to other affiliated companies of Virgin Media. Our business is managed by Virgin Media Limited, or VML, a subsidiary of Virgin Media, from its headquarters in Hook, Hampshire. Virgin Media and we believe that management of our business as an integral part of the larger Virgin Media group reaps the benefits of synergy and maximizes returns. VML performs a variety of management functions and procures services on our behalf. Pursuant to an agreement with VML, we have the legal right to offset amounts receivable from VML against amounts payable to VML. Consequently, the net balance payable to Virgin Media is disclosed under accounts payable to affiliates and related parties in the accompanying financial statements.

        Our operations are fully integrated into the operations of Virgin Media. Accordingly, the following business description describes Virgin Media's operations of which we comprise a part.

Virgin Media's Business

        Virgin Media is incorporated in the State of Delaware, United States. Its principal executive office is located at 909 Third Avenue, Suite 2863, New York, New York 10022, United States, and its telephone number is (212) 906-8440. Its U.K. headquarters are located outside of London, England in Hook, Hampshire. Virgin Media's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments thereto are available free of charge on its website at www.virginmedia.com as soon as reasonably practicable after they are filed with, or furnished to, the SEC. The investor relations section of its website can be accessed under the heading "About Virgin Media—Investors Information". The information on its website is not incorporated into this annual report.

        Virgin Media is a leading provider of entertainment and communications services in the U.K., offering "quad-play" broadband internet, television, mobile telephony and fixed line telephony services. Virgin Media is one of the U.K.'s largest providers of residential broadband internet, pay television and fixed line telephony services by number of customers. Virgin Media believes its advanced, deep fiber access network enables Virgin Media to offer faster and higher quality broadband services than its digital subscriber line, or DSL, competitors. As a result, Virgin Media provides its customers with a leading next generation broadband service and one of the most advanced TV on-demand services available in the U.K. market. As of December 31, 2009, Virgin Media provided services to approximately 4.8 million residential cable customers on its network. Virgin Media is also one of the U.K.'s largest mobile virtual operators by number of customers, providing mobile telephone services to 2.2 million pre-pay mobile customers and nearly one million contract mobile customers over third party networks. As of December 31, 2009 approximately 60.5% of residential customers on Virgin Media's cable network were "triple-play" customers, receiving broadband internet, television and fixed line telephone services from them, and approximately 10.7% were "quad-play" customers.

        In addition, Virgin Media provides 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 Business (formerly ntl:Telewest Business). Virgin Media also provides a broad range of programming through Virgin Media Television, or Virgin Media TV, which operates its wholly owned channels, such as Virgin1, Living and Bravo; and through UKTV, its joint ventures with BBC Worldwide.

        In 2009, Virgin Media implemented a new operating model for its organization and made corresponding revisions to its internal reporting structure and the related financial information used by its management, including its chief operating decision maker, to assess the performance of its business. As of December 31, 2009, Virgin Media's operating segments were as follows:

•

Consumer:  Its Consumer segment includes the distribution of television programming over its cable network and the provision of broadband and fixed line telephone services to residential consumers, both on and off its cable network. Virgin Media's Consumer segment also includes its mobile telephony and mobile broadband operations, provided through Virgin Mobile.

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•

Business:  Its Business segment includes the voice and data telecommunication and internet solutions services it provides through Virgin Media Business to businesses, public sector organizations and service providers.



•

Content:  Its Content segment includes the operations of its wholly owned television channels, such as Virgin1, Living and Bravo. Although not included in its Content segment revenue, its content management team also oversees its interest in the UKTV television channels through its joint ventures with BBC Worldwide. On April 1, 2009, Virgin Media sold its sit-up reporting unit which operated a portfolio of auction based retail television channels and was formerly included within its Content segment.

        NTL South Herts operates primarily within Virgin Media's Consumer segment. As such, further discussion on Virgin Media's business within this document is primarily focused on its Consumer segment.

Virgin Media's Cable Network Advantage

        Uniquely in the U.K., Virgin Media's network architecture includes hybrid fiber coax, or HFC, with optical fiber deployed to street cabinets, and a twinned cable, consisting of both high-capacity coaxial cable and twisted copper-pair elements, extending from the street cabinet to customers' homes. Virgin Media believes that this deployment of coaxial cable directly to the home closer to the end user, or deep fiber access, provides it with several competitive advantages in the areas served by its network. For example, its cable network allows it to concurrently deliver downstream broadband services, together with real-time television and video-on-demand content, at higher speeds and with less data loss than comparable services of other providers. Virgin Media's competitors are reliant on the access infrastructure of the incumbent, BT Group plc, or BT, which typically relies on copper-pair technology from the local exchange to the customer's home. Service providers using DSL technology over BT's existing network can currently only provide video services subject to capacity limits which can affect data download speeds. Virgin Media's cable network also offers benefits over the infrastructure of satellite service providers, which are unable to offer interactive services in the absence of a fixed line telephone connection, using third party access infrastructure. By contrast, Virgin Media's cable infrastructure allows it to provide "triple-play" bundled services of broadband internet, television and fixed line telephony services to residential customers in areas served by its network, without relying on a third-party service provider or network. See "—Virgin Media's Network" below for more detailed information relating to its network.

Consumer Segment

Cable Products and Services

        Virgin Media provides cable broadband internet, television and fixed line telephone services under the Virgin Media brand to residential customers in the U.K. Its cable services are distributed via its local access cable network. The cable network covers parts of many major metropolitan areas in England, Wales, Scotland and Northern Ireland. Virgin Media offers its customers a choice of several packages and tariffs within each of its cable product categories. Virgin Media's bundled packaging and pricing are designed to encourage its customers to purchase multiple services across its product portfolio by offering discounts to customers who subscribe to two or more of Virgin Media's products. The types and number of services that each customer uses, and the prices Virgin Media charges for these services, drive its revenue. For example, broadband internet is more profitable than its television services and, on average, its "triple-play" customers are more profitable than "double-play" or "single-play" customers. As of December 31, 2009, 85.2% of its cable customers received multiple services from Virgin Media and 60.5% were "triple-play" receiving broadband internet, television and fixed line telephone services from Virgin Media.

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Broadband Internet

        Virgin Media delivers high-speed broadband internet services to customers on its cable network. As of December 31, 2009, it provided cable broadband services to approximately 3.8 million subscribers. In 2009, Virgin Media completed significant upgrades to its network, including the network-wide roll-out of the latest DOCSIS 3.0 technology, which significantly increased upstream and downstream data transmission speeds across its network. Following these network upgrades, in July 2009, Virgin Media became the first provider to offer download speeds of up to 50 Mbps to over 12 million homes across the UK. In May 2009, Virgin Media also initiated preliminary trials of download speeds of up to 200 Mbps and upload speeds of up to 10 Mbps within limited geographic areas.

        Virgin Media's broadband internet offering currently focuses on three tiers of high-speed broadband service at download speeds of up to 10 Mb, 20 Mb and 50 Mb, respectively. Virgin Media customers within each of these tiers also benefit from unlimited downloads, subject to its fair usage and traffic management policies, and advanced security software, including anti-virus and anti-spyware protection. In 2009, Virgin Media also increased its focus on developing additional products to complement its broadband offering, such as its online data storage service, which allows its top tier subscribers to back-up, store and share specified amounts of data and photographs online for no additional charge. Virgin Media also expects to launch a digital music service in 2010, which will allow its cable broadband customers to stream and download an unlimited number of music tracks from Universal Music's catalogue for a monthly subscription fee.

        Virgin Media operates a web portal, virginmedia.com, which offers a broad range of content, such as music, games, movies and television programming, including near-live clips of English football highlights. In December 2009, Virgin Media introduced an online gaming channel to its web portal, which was followed in January 2010, by the launch of a music channel, offering streaming video content. Virgin Media's customers are also able to access their email accounts and customer care information through its website. Virgin Media generates revenue from its website, primarily from third-party advertising and search engines. Virgin Media also uses the website to cross-promote its product portfolio.

Television

        Virgin Media offers a wide range of television services to customers on its cable network. As of December 31, 2009, Virgin Media provided cable television services to approximately 3.7 million residential subscribers, of which approximately 3.6 million received its digital television, or DTV service and approximately 87,000 received its analog television, or ATV, service.

        Virgin Media's DTV service includes access to over 160 linear television channels, advanced interactive features, and a range of premium subscription-based and pay-per-view services. From June 2009, Virgin Media's subscription-based premium television services have been provided by its Luxembourg subsidiary, Future Entertainment Sarl, trading as Virgin Media Entertainment. Virgin Media offers a free-to-air digital television service, or Free TV, to certain customers on its cable platform. Virgin Media's Free TV service provides access to approximately 45 linear channels and radio services such as Virgin1, Five US, Five, E4 and Yesterday. In addition to its linear television services, which allow its customers to view television programming at a scheduled time, its DTV and Free TV customers also have access to certain digital interactive services, including one of the most comprehensive video-on-demand, or VOD, services in the U.K. See "Virgin TV On Demand" below. Virgin Media also provides ATV services to customers in limited geographic areas.

        Virgin Media's cable network enables it to deliver a broad range of digital interactive services, including games, news, entertainment and information services, from an on-screen menu. Virgin Media also offers interactive "red button" applications from the BBC and other commercial broadcasters.

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"Red button" functionality in the U.K. permits television viewers to press a red button on their remote control handset to receive additional interactive services, including multiple broadcasts. For example, in a Wimbledon tennis broadcast, a customer can press the red button and choose which match to watch.

Virgin TV On Demand

        Virgin Media's VOD service, Virgin TV On Demand, provides its customers with instant access to a wide selection of premium movies, television programs and series, music videos and other on-demand content. The service offers features such as freeze frame, fast-forward and rewind, which allow its customers increased control over the content and timing of their television viewing. Additionally, Virgin Media's cable network enables it to provide VOD content to its customers with no concurrent degradation of their broadband speed. As of December 31, 2009, Virgin Media had over 4,500 hours of on-demand content. In 2009, its VOD usage increased to 74 million average monthly views in the fourth quarter, up from 55 million average monthly views in the first quarter. Virgin Media believes that customers who use its VOD service are less likely to churn.

        The primary types of content available within Virgin TV On Demand are TV programming, movies and music videos. A selection of content is available free of charge to all of Virgin Media's DTV customers. This is primarily focused within Virgin Media's 'catch-up' TV service which offers approximately 480 hours of popular broadcast TV shows. Virgin Media also offers BBC iPlayer as part of its on-demand service, which enables viewers to catch-up on over 350 hours of BBC programs. In 2009, Virgin Media expanded its VOD offering with content from ITV plc, or ITV, one of the largest commercial broadcasters in the U.K., including the addition of up to 80 hours of catch-up TV per week.

        Virgin Media offers its DTV customers a subscription VOD, or SVOD, package, including up to 2,300 episodes of premium TV programming and over 3,000 music videos. Virgin Media's SVOD package is provided free of charge to subscribers to its top tier TV package and is available for an additional monthly fee to its other DTV customers. In 2009, Virgin Media expanded its SVOD offering with the launch of 'Picture Box,' a subscription movie-on-demand service, offering premium movie content in both standard and high definition format, and with the addition of over 250 hours of TV programming from ITV. All of Virgin Media's DTV customers also have access to pay-per-transaction content, including approximately 500 movies and its entire library of music videos. Pay-per-transaction movies and music are available for 24 hours after purchase and may be accessed multiple times during that period for a single fixed charge.

High Definition Television

        In 2009, Virgin Media expanded its high definition, or HD, television offering with the introduction of six linear HD channels: ESPN HD, LIVING HD, FX HD, MTV Networks HD, National Geographic Channel HD and C4 HD. Virgin Media also offers HD versions of BBC linear and on-demand content. As of December 31, 2009, Virgin Media offered approximately 260 hours of HD content on Virgin TV On Demand, including BBC iPlayer, HD films and a range of HD TV programming such as Generation Kill, The Sopranos and Planet Earth. Virgin Media's HD content is available to its DTV and Free TV customers.

Digital Video Recorders

        Virgin Media offers one of the most advanced digital video recorders, or DVRs, in the U.K. Set-top boxes equipped with DVRs digitally record television programming to a hard disk in real-time, which allows customers to pause or rewind the program at any point during or after broadcast. The Virgin Media DVR, which is called the "V+ Box", is available to its DTV customer base for a premium monthly rental option or an up-front payment as part of its top tier. The V+ Box has 160

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Gigabytes of hard disk storage space (up to 80 hours of broadcast television), is HD-enabled and has three tuners, allowing viewers to record two programs while watching a third. Virgin Media's V+ Box customers with an HD-compatible television can also access its HD on-demand content. As of December 31, 2009, Virgin Media had approximately 862,000 V+ Box customers, representing 23.6% of its digital subscribers.

        In 2009, Virgin Media entered into a strategic partnership with TiVo Inc., or TiVo, to develop a next generation set-top box which provides converged television and broadband capabilities. Under the agreement, TiVo will become the exclusive provider of user interface software for Virgin Media's next generation set-top boxes and Virgin Media will become the exclusive distributor of TiVo services and technology in the United Kingdom.

Fixed Line Telephony

        Virgin Media provides local, national and international telephony services to its residential customers on its cable network. Virgin Media offers a basic line rental service to its cable customers for a fixed monthly fee. In addition to basic line rental, Virgin Media also offers tiered bundles of features and services, including calling plans that enable customers to make unlimited national landline calls during specified periods, for an incremental fixed monthly fee. Virgin Media's customers may also subscribe to additional services such as call waiting, call blocking, call forwarding, three-way calling, advanced voicemail and caller line identification services for an additional fee. As of December 31, 2009, Virgin Media provided cable telephony services to approximately 4.1 million residential subscribers.

Marketing and Sales

        Virgin Media's consumer strategy focuses primarily on marketing bundled offerings of products and services across its "quad-play" portfolio to existing and potential customers. Virgin Media's bundling strategy provides its customers with discounts from the price of buying its services separately and the convenience of a single bill. Virgin Media believes that customers who subscribe to multiple services from it are less likely to churn. Virgin Media also actively pursues opportunities to cross-sell complementary services across its product range and up-sell higher value services to its existing customers.

        Virgin Media offers its consumer products and services through a broad range of retail channels, including via telesales, customer care centers, online and points of sale. Virgin Media also engages in direct marketing initiatives through a dedicated national sales force of approximately 250 representatives, as well as comprehensive national and regional mass media advertising initiatives. In 2009, Virgin Media significantly expanded its portfolio of own brand stores with the opening of 26 Virgin Media branded retail stores and the introduction of 23 Virgin Media branded shopping center kiosks. Virgin Media's own brand stores and kiosks offer a complete range of its consumer products and services and, on average, more than half of customers that subscribed to its services at one of its own brand stores during 2009 took one of its triple-play or quad-play product bundles. As of December 31, 2009, Virgin Media had in aggregate 49 own brand stores and 23 kiosks.

        In February 2010, Virgin Media announced its agreement with leading electronics retailer, Best Buy, to showcase and sell Virgin Media products in their stores in the U.K., which are expected to open in the second quarter of 2010.

Customer Service

        Virgin Media believes that effective customer care contributes to customer satisfaction, which results in reduced churn and improved acquisition rates of new customers. As of December 31, 2009, Virgin Media employed approximately 2,450 staff for its cable and non-cable call centers.

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Business Segment

        Virgin Media's Business segment, managed through Virgin Media Business (formerly ntl:Telewest Business), offers a broad portfolio of voice, data and internet solutions to commercial customers in the U.K., ranging from analog telephony to managed data networks and applications. Through Virgin Media Business, Virgin Media provides services to approximately 65,000 U.K. businesses and over 250 local councils. Virgin Media also supplies communications services to over half of the U.K.'s emergency services providers.

Virgin Media's Network

        Virgin Media delivers high-speed voice and data services over its HFC network using Data Over Cable Service Interface Specification 3.0, or DOCSIS 3.0. Virgin Media's deep fiber access network enables it to transmit data by means of fiber optic cable from origination points known as "headends" and "hubs" to a group of distribution "nodes." The connection into each home from the fiber access network comprises two components combined into a single drop cable. First, to provide television services and high-speed broadband internet access, Virgin Media uses high capacity, two-way, coaxial cable which has considerable bandwidth and is able to support a full portfolio of linear and on-demand TV services as well as high-speed broadband services. Virgin Media currently offers download speeds of up to 50 Mbps via coaxial cable, and has trials underway with respect to download speeds of up to 200 Mbps. Second, Virgin Media uses short length twisted copper-pair to connect fixed line telephony services to its fiber access network. Virgin Media's relatively short twisted copper pairs (typically 500 meters in length) are also capable of supporting the latest Very High Speed Digital Subscriber Line 2, or VDSL2 broadband technologies, enabling speeds of up to 50 Mbps downstream and 10 Mbps upstream. As a result of the extensive use of fiber in its access networks, Virgin Media is also able to provide high-speed Ethernet services directly to business customers and provide nationwide area networking to these customers via its core networks.

        Virgin Media believes that its deep fiber access network has enabled it to take a leading position in the roll-out of next generation broadband access technologies in the U.K. In 2009, Virgin Media completed significant upgrades to its network, including the network-wide roll-out of the latest DOCSIS 3.0 technology which significantly increased upstream and downstream transmission speeds across its network. Virgin Media also invested in extending its network and upgrading from analog to digital in select urban areas where a significant level of traffic is anticipated. In 2009, Virgin Media upgraded or extended its network to provide "triple play" cable capability to over 100,000 additional homes. As of December 31, 2009, approximately 96% of the homes served by Virgin Media's cable network could receive all of Virgin Media's digital television and fixed line telephone services.

        Virgin Media also employs a variety of alternative methods to connect its national telecommunications network over the "last mile" to the premises of customers located beyond the reach of its cable network, including by leasing circuits and DSL connections on the local networks of other service providers.

Information Technology

        The operation and support of Virgin Media's information technology systems are performed by a mix of outsourced and internally managed services. These systems include billing, enterprise resource planning, business intelligence, corporate network, payroll, data center and desktop infrastructure. Virgin Media continues to decommission or consolidate a number of diverse software applications and hardware platforms in order to reduce its dependency on high cost external support and management services. In 2009, Virgin Media completed the in-sourcing of information technology services from one of its outsourced providers, as part of its plan to consolidate systems and partners.

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Competition

Consumer Segment

        Virgin Media faces intense competition from a variety of entertainment and communications service providers, which offer comparable broadband internet, television, fixed line telephony and mobile telephony services. In addition, technological advances and product innovations have increased and will likely continue to increase the number of alternatives available to Virgin Media's customers from other providers and intensify the competitive environment. See "Risk Factors—Virgin Media operates in highly competitive markets." However, Virgin Media believes that it has a competitive advantage in the U.K. residential market due to the superior technical capabilities of its cable network over the network of the incumbent BT, which many of its competitors rely on to provide their services.

        Virgin Media offers most of its products on a stand-alone basis or as part of bundled packages designed to encourage customers to subscribe to multiple services. Virgin Media offers broadband internet, fixed line telephony and mobile telephony and data services throughout the U.K., and currently offer television services exclusively in areas on its cable network. Key recent developments among our primary competitors include:

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BT Group plc.  BT offers fixed line telephone, broadband and IP-based television services. In 2009, BT commenced roll-out of fiber-based broadband, with coverage expected to reach up to four million homes by the end of 2010, and in aggregate up to 10 million homes by 2012. While the full implementation of this £1.5 billion program has been made subject to the continued existence of favorable regulatory conditions, it is intended to deliver a range of services using a mixture of fiber-to-the-premise or fiber-to-the-cabinet technology, to approximately 2.5 million homes and 7.5 million homes, respectively. During 2009, BT began offering customers within enabled areas broadband download speeds of up to 20 Mbps via next generation Asymmetric Digital Subscriber line, or ADSL2+, technology. BT also continued to expand its library of on-demand programming through a number of agreements with content partners for its IP pay television service, BT Vision.



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British Sky Broadcasting Group plc.  BSkyB, an established competitor in the pay television market, offers aggressively discounted triple-play bundles of broadband, television and fixed line telephone services. BSkyB currently has a limited "push" VOD service, branded Sky Anytime, pursuant to which content is downloaded to compatible DVRs overnight, but has announced its intention to launch a "pull" VOD service in 2010, which will allow BSkyB to provide a real-time VOD offering. In 2009, BSkyB focused its marketing campaigns heavily on the benefits of HD television and began offering its HD-enabled DVR to subscribers at a substantially reduced cost, or free of charge. In 2010, BSkyB HD DVR was available free of charge with its basic television package. Additionally, BSkyB has also announced its intention to launch a three-dimensional, or 3D television channel in 2010.



•

Carphone Warehouse Group plc.  Carphone Warehouse resells mobile phone services (including Virgin Mobile) via its own retail distribution channels and offers fixed line telephone and broadband services under its TalkTalk brand. In July 2009, TalkTalk completed the acquisition of Tiscali's UK broadband business, making it the UK's largest residential broadband provider. During 2009, Carphone Warehouse continued to pursue an aggressive pricing policy for its TalkTalk fixed telephone line and broadband bundle by standardizing the package and offering "Boost" packages (including higher download speed and additional voice calls), which are each available at a fixed incremental cost per month. In 2009, Carphone Warehouse announced its intention to demerge its TalkTalk operations with effect from March 2010. Following the demerger, the resulting entities, TalkTalk Telecom Group PLC and New Carphone Warehouse PLC (to be renamed Carphone Warehouse Group plc), will compete in the markets for broadband and fixed line telephony, and mobile telephony, respectively.

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Orange.  Orange offers mobile telephony, mobile broadband, fixed line telephony and broadband services. In 2009, Orange launched broadband speeds of up to 20 Mbps for those in an enabled area and began offering a leading, high-end smartphone, currently available on limited networks in the U.K. In August 2009, France Telecom and Deutsche Telekom announced the intention to merge Orange UK and T-Mobile UK as a 50/50 joint venture. If completed, the merger would result in the combined entity being the largest mobile operator in the U.K..



•

O2.  O2 offers mobile telephony, mobile broadband and fixed line broadband services. In 2009, O2 focused its mobile offering around smartphones, attractively priced SIM-only tariffs and its customer loyalty program. O2 also continued its aggressive pricing strategy on its home broadband packages and recently announced its intention to enter the fixed line telephony market in March 2010.

Broadband Internet

        Virgin Media's most significant competitor in the market for broadband internet services is BT, which provides broadband internet access services over its own DSL network both as a retail brand and as a wholesale service. An increasing number of companies, such as BSkyB, Carphone Warehouse (TalkTalk), O2 and Orange, are deploying their own network access equipment in BT exchanges via a process known as local loop unbundling, or LLU. LLU allows an ISP to reduce the recurring operating costs incurred through BT Wholesale by reducing the proportion of traffic that must travel directly over BT's network. LLU deployment requires a substantial capital investment to implement, and requires a large customer base to deliver a return on investment. Competitors may use new alternative access technology such as ADSL2+, which provides subscribers with significantly faster download speeds when compared to traditional ADSL connections.

        In addition to the increasing competition and pricing pressure in the broadband market arising from LLU, mobile broadband and technological developments, such as long term evolution, or LTE, 3G mobile technology and other wireless technologies, such as Wi-Fi and Wi-Max, may subject Virgin Media to increased competition over time in the provision of broadband services.

Cable Television

        Virgin Media's digital television services compete primarily with those of BSkyB. BSkyB is the only pay satellite television platform in the U.K. and has a high market share of the U.K. pay television market. BSkyB owns the U.K. rights to both standard definition and HD versions of various sports and movie programming content, which it has used to create some of the most popular premium pay television channels in the U.K. BSkyB is therefore both Virgin Media's principal competitor in the pay television market, and an important supplier of premium television content to Virgin Media.

        Residential customers may also receive digital terrestrial television, or DTT. Digital signals are delivered to customer homes through a conventional television aerial and a separately purchased set-top box or an integrated digital television set. The free-to-air DTT service in the U.K. is branded Freeview. This service is provided by a consortium of operators, including the BBC, and offers customers a limited range of television channels, which include the traditional analog channels as well as BBC HD and ITV1 HD. Customers do not pay a monthly subscription fee for basic Freeview service but must acquire a Freeview enabled set-top box or a television with a digital tuner. Freeview also offers a range of DVRs under the brand "Freeview+". Residential customers may also supplement Freeview DTT offerings by subscribing to additional content through Top Up TV. Top Up TV is a pay television service offering selected programs, which are typically downloaded to the set-top box overnight, for a fixed fee to subscribers who otherwise receive Freeview and have purchased a Top Up TV DVR.

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        There is also a growing demand for full-length video content via broadband connections to the personal computer. Content owners, online aggregators and television channel owners are increasingly using broadband as a new digital distribution channel direct to consumers. In 2008, the BBC launched an initiative know as Project Canvas, to develop technical standards to enable content typically accessed via a computer on the internet to be delivered directly to the television. Project Canvas is intended to provide an open platform, allowing any broadcaster to make its content available via Project Canvas enabled set-top boxes. Participants in the Project Canvas joint venture include ITV, C4, Five, BT and Talk Talk. If Project Canvas is implemented in its current proposed form, in which adoption of a prescribed interface is a condition for competing platforms to use the "Canvas" brand, the availability of a standardized broadband-enabled television platform may result in increased competition for pay television broadcasters. In December 2009, the BBC Trust published a consultation on its provisional decision to approve BBC's participation in the project. Virgin Media has responded to this consultation and is proactively engaged with the BBC Trust and key policy makers to ensure that Canvas does not distort effective competition.

        BBC and ITV also offer a free-to-air digital satellite alternative to Freeview DTT service, known as Freesat. Freesat offers approximately 85 subscription-free channels, including select high definition channels such as BBC HD and ITV HD. Freesat channels are delivered to the home through a separately purchased satellite receiver. Freesat also offers a range of DVRs under the brand "Freesat+".

        Residential customers may also access digital television content by means of internet protocol television, or IPTV. BT Vision, a combined DTT television service and VOD service offered by BT over a DSL broadband connection, is available throughout the U.K. BSkyB also offers a VOD service over a broadband connection, Sky Player TV, which provides live streamed TV and VOD on a subscription basis.

        The U.K. government has stated that it will terminate ATV transmission by 2012. Consumers wishing to receive television services will have to convert to DTV, currently available via cable, digital satellite, DTT or DSL. However, when ATV transmission is terminated, the DTT signal and network may be strengthened. This will enable DTT to be made available to additional customers' homes that cannot currently receive a signal. It may also provide additional capacity to allow the Freeview channel line-up to be expanded to include new channels.

        The communications industry is constantly evolving and there are a number of new and emerging technologies which can be used to provide video services that are likely to compete with Virgin Media's DTV and VOD services. These include DSL services mentioned above and next generation LTE services. Virgin Media expects continued advances in communications technology and in content, such as 3D TV. As a result of changes in technologies, consumer behavior, and in the regulatory and competitive environments, it is difficult to predict how its operations and businesses may be affected in the future.

Fixed Line Telephony

        Virgin Media competes primarily with BT in providing telephone services to residential customers in the U.K. BT occupies an established market position as the incumbent. Virgin Media also competes with other telecommunications companies that provide telephone services directly, through LLU, or indirectly, including Carphone Warehouse (TalkTalk), BSkyB, and mobile telephone operators such as O2, Orange, T-Mobile, Vodafone and 3 UK.

        Virgin Media also competes with mobile telephone networks that offer consumers an alternative to fixed line telephone services. Mobile telephone services also contribute to the competitive price pressure in fixed line telephone services.

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        In addition, Virgin Media faces competition from companies offering voice over internet protocol, or VoIP, services using the customer's existing broadband connection. These include services offered by independent providers, such as Vonage and Skype, as well as those affiliated with established competitors such as BT and Orange. These services generally offer free calls between users of the same service, but charge for calls made to fixed line or mobile numbers either on a flat monthly rate for unlimited calls (typically restricted to geographic areas) or based on usage.

Business Segment

        The U.K. business telecommunications market is characterized by strong competition and ongoing consolidation. Competition in the U.K. business telecommunications market continues to be value driven, the key components of which are quality, reliability and price.

        Virgin Media Business competes primarily with traditional network operators, such as BT and C&W. BT represents the main competitive threat nationally due to its network reach and product portfolio. Virgin Media also competes with regional providers, such as COLT Telecom Group plc, or COLT Telecom, which have a strong network presence within limited geographic areas. Recently, Virgin Media has faced increasing competition from the launch of services by MNOs targeting small business customers.

        Within retail markets, traditional competitors are becoming increasingly focused, with organizations such as C&W targeting larger national and multi-national corporations. Virgin Media continues to focus on small, medium and large nationally oriented businesses and public sector organizations. SIs, such as Affiniti, a trading name of Kingston Communications (Hull) Plc, are also becoming an increasing competitive threat, as large organizations continue to focus on IT integration, management and outsourcing.

Regulatory Matters

Overview

Legislative Framework

        Virgin Media's business activities are subject to the laws and regulations of the European Union and the U.K. The descriptions which follow are summaries and should be read in conjunction with the texts of the relevant directives, statutes and regulations.

        The primary legislation relating to Virgin Media's sector is the U.K. Communications Act 2003, or the Communications Act. The Communications Act regulates all forms of communications technology, whether used for telecommunications or broadcasting, and implements a series of relevant European Union, or EU, directives, as set out below:

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Directive 2002/21 on a common regulatory framework for electronic communications networks and services;



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Directive 2002/20 on the authorization of electronic communications networks and services;



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Directive 2002/19 on access to and interconnection of electronic communications networks and associated facilities; and



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Directive 2002/22 on universal service and users rights relating to electronic communications networks and services.

        These directives are supplemented by EU Directive 2002/58, concerning the processing of personal data and the protection of privacy in the electronic communications sector, which was implemented in the U.K. by the Privacy and Electronic Communications Regulations 2003. Collectively, the preceding five EU directives are referred to as the European Framework.

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        In December 2009, the European Parliament amended the European Framework to provide for enhanced consumer and business protection measures and adopted a new directive establishing an EU-wide communications regulatory body. These reforms are required to be transposed into law in the U.K. by June 2011.

        Virgin Media is also subject to regulation under the U.K. Broadcasting Acts 1990 and 1996 and other U.K. statutes and subordinate legislation, including the Competition Act and the Enterprise Act.

U.K. Regulatory Authorities

        The U.K. Office of Communications, or Ofcom, is the key regulatory authority for the communications sector in which we operate. Additionally, the U.K. Office of Fair Trading has concurrent jurisdiction with respect to competition matters relating to electronic communications. Ofcom is responsible for furthering the interests of consumers by promoting competition. In particular, Ofcom is responsible for regulating the behavior of providers of electronic communications networks or services that have significant market power, or SMP, in identified markets, which may have a harmful influence on competition and consumers. A provider is deemed to have SMP if it has a position of economic strength affording it the power to act independently of competitors and customers within a given market.

Development of the U.K. Digital Economy

        In June 2009, the U.K. government published a report setting out its strategy for the further development of the digital and communication sectors in the U.K., know as the Digital Britain Report. The Digital Britain Report outlines proposals, addressed to both regulators, such as Ofcom, and industry, to support and develop the U.K. digital economy. Key proposals in the area of telecommunications include:

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A three year plan to boost digital participation;



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universal access to broadband connections of 2 Mbps by 2012;



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the creation of a fund, via taxation, to deliver next generation broadband;



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liberalization of spectrum to further the deployment of long term evolution, or LTE, services; and



•

legal and regulatory proposals to curb digital piracy.

        In November 2009, the U.K. government published the Digital Economy Bill, which is intended to give effect to the majority of the proposals in the Digital Britain Report requiring primary legislation. The Digital Economy Bill covers a number of the recommendations under the Digital Britain Report, including measures to address illicit file sharing, and new duties of Ofcom to promote investment in networks and public service content, and to expand its reporting duties. Virgin Media intends to engage closely with the relevant authorities on the design and implementation of these measures, in particular with respect to the universal access and next generation proposals and initiatives to combat illicit file sharing.

        As part of the Digital Britain program, the U.K. government is also undertaking a number of consultations on detailed issues, including with respect to new approaches to the use and allocation of wireless radio spectrum and the next generation broadband fund. Virgin Media is actively engaged in the consultation processes related to its business activities. For example, in response to the consultation on spectrum modernization, Virgin Media has engaged with relevant U.K. governmental authorities and industry stakeholders active in the U.K. and the EU to promote its position that future uses of spectrum should not be implemented in a manner which has a significant adverse impact on the

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existing activities or equipment currently operating in those frequencies, including the customer premise equipment of its customers and those of other communications service providers.

Regulation of Television Services

        Virgin Media is required to hold individual licenses under the Broadcasting Acts 1990 and 1996 for any television channels which it owns or operates and for the provision of certain other services on its cable TV platform, such as electronic program guides. These television licensable content service, or TLCS, licenses are granted and administered by Ofcom. Under the licenses, each covered service must comply with a number of Ofcom codes, including the Broadcasting Code, and with all directions issued by Ofcom. Breach of any of the terms of a TLCS license may result in the imposition of fines on the license holder and, ultimately, to the license being revoked.

        In March 2007, following receipt of a request from Virgin Media, in conjunction with other affected operators, Ofcom initiated an investigation into the U.K. pay television market. Virgin Media's joint submission outlined certain features of the U.K. pay TV market which, it believes, distort effective competition within this market and, in particular, favor the pay TV provider BSkyB. Ofcom has since solicited responses to several consultations on this market. In its latest consultation on the pay TV market, issued in June 2009, Ofcom found that BSkyB has SMP in the wholesale supply of certain premium sports and premium movie channels and further identified incentives for BSkyB to restrict supply of these channels to other pay TV providers. In this consultation, Ofcom set out specific details of its proposed wholesale must-offer remedy including indicative wholesale premium prices. In conjunction with the pay TV investigation, Ofcom is also considering a proposal by BSkyB to replace its three free-to-air channels on Freeview with a bundled retail offering of five pay TV services, referred to as Picnic, which would include certain premium sports and premium movie channels, as the competition concerns and remedies proposed by Ofcom in the pay TV investigation are of direct relevance to its assessment of Picnic. Virgin Media submitted a response to the third consultation in September 2009 and expect Ofcom to issue its final statement on the pay TV market in early 2010. If implemented in its proposed form, such a remedy could reduce the wholesale prices Virgin Media is charged for premium TV content and improve the availability of BSkyB HD premium content, which would enable it to offer more competitive and innovative consumer offerings.

        Ofcom also initiated a review in 2006 of the terms under which operators of DTV platforms in the U.K., such as Virgin Media, allow access to their platforms for third-party television channels and content providers. However, this review has not progressed beyond its initial stages and is not likely to do so until Ofcom has concluded its investigation into pay TV. Virgin Media is therefore unable to assess the likely outcome of this review and resulting impact on its activities in this sector at this time.

Regulation of Telecommunications Services

        In order to operate in the telecommunications sector, a provider must comply with general conditions imposed by Ofcom. These general conditions cover a broad range of issues, including interconnection standards, number portability, deployment of telephone numbers, access to emergency services, and sales and marketing standards. Any breach of these general conditions could lead to the imposition of fines by Ofcom and, ultimately, to the suspension or revocation of a company's right to provide electronic communications networks and services. Ofcom also undertakes periodic reviews of the various economic markets within the telecommunications sector to establish whether any provider has SMP warranting the imposition of remedies.

Fixed Line Telephony Services

        As a fixed network operator Virgin Media, like all other fixed network operators, including the incumbent, BT, are deemed to have SMP in wholesale call termination on its own network, and are

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therefore subject to SMP conditions in this market. However, these conditions do not have a significant impact on Virgin Media's ability to compete in the wholesale market. Recent changes in market conditions at the retail level led to a finding in September 2009 by Ofcom that BT no longer had SMP in retail telephony and the consequent removal of all relevant SMP conditions. This removal of SMP conditions may result in increased competition for Virgin Media in the markets for retail fixed line telephony.

Corporate Responsibility

        Virgin Media is committed to demonstrating corporate responsibility, or CR, across all of its business activities. Virgin Media has implemented a CR governance structure to deliver more effective scrutiny and management of the issues most likely to impact its reputation as a responsible business. Virgin Media's CR Committee, chaired by its chief executive officer and comprised of members of its senior management, convenes quarterly and advises on the most effective means of managing the CR risk and opportunity that emerge from this process.

        During the course of 2009, Virgin Media focused on identifying those issues that have the most impact on its ability to demonstrate CR. Virgin Media's key priority is to ensure that its customers can safely and confidently enjoy the benefits of its digital product which it refer to as the provision of "digital confidence." Other priorities include managing its environmental impact, particularly its carbon emissions; ensuring that Virgin Media deals with suppliers that share its commitment to sustainability; and developing the quality of its workplace through focusing on issues such as diversity and wellness.

Seasonality

        Some revenue streams are subject to seasonal factors. For example, fixed line telephone usage revenue by customers and businesses tends to be slightly lower during summer holiday months. Virgin Media's consumer cable churn rates include persons who disconnect their service because of moves, resulting in a seasonal increase in its churn rates during the summer months when higher levels of U.K. house moves have traditionally occurred and students leave their accommodation between school years.

Research and Development

        Virgin Media's research and development activities involve the analysis of technological developments affecting its cable television, telephone and telecommunications business, the evaluation of existing services and sales and marketing techniques and the development of new services and techniques.

Patents, Trademarks, Copyrights and Licenses

        Virgin Media does not have any material patents or copyrights nor does it believe that patents play a material role in its business. Virgin Media owns or has the right to use registered trademarks, which in some cases are, and in others may be, of material importance to its business, including the exclusive right to use the "Virgin" name and logo under licenses from Virgin Enterprises Limited in connection with its corporate activities and the activities of its consumer and business operations, and a large part of its content operations. These licenses, which expire in April 2036, are exclusive to Virgin Media within the U.K. and Ireland and are subject to renewal on terms to be agreed. They entitle Virgin Media to use the "Virgin" name for the television, broadband internet, fixed line telephone and mobile phone services it provides to its consumer and business customers, and in connection with the acquisition and branding of sports, movies and other premium television content and the sale of certain communications equipment, such as set top boxes and cable modems. For Virgin Media's content operations, it is entitled to use the "Virgin Media Television" name for the creation, distribution and management of its wholly owned television channels, and to use the "Virgin" name for its television

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channel, Virgin1. For its business division, Virgin Media is licensed to use the name "Virgin Media Business" for the provision of business communications services. Virgin Media's license agreements provides for an annual royalty of 0.25% of certain consumer, business and content revenues, subject to a minimum annual royalty of £8.7 million in relation to its consumer and content operations, excluding Virgin1, and £1.5 million in relation to its business operations. With respect to Virgin1, Virgin Media pays an annual royalty of 0.5% of revenues received by that channel, subject to a minimum of £100,000. As part of the agreement, it has the right to adopt, and have adopted, a company name for its parent, Virgin Media Inc., over which, together with the name "Virgin Media", it retains worldwide exclusivity. Virgin Media also has the right to use the "Virgin Media Entertainment" name for its premium TV distribution operations in Luxembourg.

Employees

        As the management of our business is performed by Virgin Media, we do not have any employees on our payroll. At December 31, 2009, Virgin Media had 12,107 employees, of whom 10,939 were full-time and 1,168 were part-time employees. Virgin Media also had 1,355 temporary employees. Approximately 12% of its employees are covered by recognition agreements with the Communication Workers Union, or CWU, and the Broadcasting, Entertainment, Cinematograph and Theatre Union, or BECTU. These agreements are terminable by either the relevant union or Virgin Media with three months' written notice. Except for these arrangements, no other employees are covered by collective bargaining agreements. Virgin Media believes it has good relationships with its employees, CWU and BECTU.

Item 1A.    RISK FACTORS

        Our business, financial condition or results of operations could be materially adversely affected by any of the risks and uncertainties described below. Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business.

Risks Relating to Our Business and Industry

We rely on the continued support of Virgin Media.

        We do not directly employ personnel of our own. The various personnel required to operate our network are employed by Virgin Media Limited and its affiliates, and our business is managed by our General Partner, NTL Fawnspring Limited, a wholly owned subsidiary of Virgin Media, from its headquarters in Hook, Hampshire. We also generally rely on Virgin Media's management, organization, financing and infrastructure to carry on our business operations. If Virgin Media were unable, or ceased, to provide us with these essential services, we would be unable to provide services to our customers. Our reputation would be materially adversely affected and we would lose customers and revenue. We might not be able to continue the operation of our business.

There is no established public trading market for our limited partnership interests and disposition thereof is restricted.

        While our limited partnership interests are publicly held, there is no established public trading market for our limited partnership interests, nor is it expected or intended that such a market will develop in the future.

        In addition, there are limitations on the transferability of interests in the partnership, including a condition that our General Partner consents to any transfer. A limited partner may therefore be unable to liquidate an investment whenever the limited partner decides and may be required to bear the risk of the investment for an indefinite period of time.

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There are conflicts of interests arising out of transactions entered into with our General Partner and its affiliates.

        Our General Partner has concluded, on our behalf, various arrangements and agreements with itself and its affiliates to provide services to us, including the provision of consulting and management, financing, infrastructure, marketing, billing, basic television channels and other services. Our General Partner and its affiliates could enter into additional arrangements with us in the future, including merger, acquisition and disposition transactions. Some of these arrangements are included in our Partnership Agreement, while others are subject to standards included in our Partnership Agreement. Additionally, some of these arrangements involve reimbursement for direct and indirect expenses and charges allocated to us.

        Our General Partner has a duty to act in good faith and in our best interests in dealing with us, and not to take advantage of (or permit its respective affiliates to take advantage of) the conflicts arising out of these relationships. However, none of the arrangements were negotiated at arm's-length and there can be no assurance that the terms are as favorable as those available from unaffiliated parties.

We have incurred losses in the past and may not be profitable in the future.

        In 2009, we made a net profit of $4.8 million, however we have incurred substantial aggregate net losses since our inception. We may not continue to make a net profit in the future and may never be profitable on an aggregate basis. Additionally, failure to achieve profitability could adversely affect our ability to make required payments or obtain additional required funds which would make it impossible for us to continue to operate our business.

We operate in a limited geographical area.

        Our franchise area comprises the three administrative areas of Three Rivers, Watford and Hertsmere, in which there are approximately 95,400 homes. Given the relatively limited size of our franchise area, material problems affecting our ability to provide services to our customers would likely affect the totality of our franchise area. Consequently, any resulting loss of customers and revenues would not be compensated by revenues from another part of our business that would not have been affected. Similarly, other local events may disproportionately affect customers, business, and revenues.

The IRS could treat us as a corporation for tax purposes, which would negatively affect our limited partners.

        The after-tax economic benefit of an investment in the limited partnership interests depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the IRS on this or any other tax matter affecting us.

        If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our income at the corporate tax rate, which is currently a maximum of 35%. Distributions to our limited partners may be taxed again as corporate dividends, and no income, gains, losses or deductions would flow through to them. Because a tax would be imposed upon us as a corporation, any cash available for distribution to our limited partners could be reduced.

        Current law may change so as to cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to entity-level taxation.

Our limited partners may be required to pay taxes on income from us even if they do not receive any cash distributions from us.

        Our limited partners will be required to pay any federal income taxes on their share of our taxable income even if they receive no cash distributions from us. Our limited partners may not receive cash

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distributions from us equal to their share of our taxable income or even the tax liability that results from that income.

Risks Relating to Virgin Media's Business and Industry

        We operate entirely within Virgin Media's Consumer and Business segments and our services are provided and sold to our customers by Virgin Media on an integrated basis with Virgin Media services. As a result, the following Virgin Media risk factors are also relevant to our operations, and references to the risks to Virgin Media should, as appropriate, be read as risks to us.

Virgin Media operates in highly competitive markets.

        The markets for broadband internet, television, telephony and business services in which Virgin Media operates are highly competitive. Virgin Media faces significant competition from established and new competitors in each of these markets, and believes that competition will intensify as technology evolves. For example, distribution of entertainment and other information over the internet, as well as through mobile phones and other devices, continues to increase in popularity. These technological developments are increasing the number of media choices available to subscribers. In addition, continued consolidation within the media industry may permit more competitors to offer "triple-play" bundles of digital television, fixed line telephone and broadband services, or "quad-play" bundles including mobile telephone services. Many of Virgin Media's competitors are part of multi-national groups, and some may have substantially greater financial resources and benefit from greater economies of scale than it does.

        In order to compete effectively, Virgin Media may be required to reduce the prices it charges for its services or increase the value of its services without being able to recoup associated costs. In addition, some of its competitors offer services that Virgin Media is unable to offer. Any increase in competitive pressures in its markets may lead to a decrease in its average revenue per user, increased costs, increased customer churn or a reduction in the rate of customer acquisition, which could have an adverse effect on its business, financial condition, results of operations and cash flows.

The sectors in which Virgin Media competes are subject to rapid and significant changes in technology, and the effect of technological changes on its businesses cannot be predicted.

        The broadband internet, television, telephony and business services sectors are characterized by rapid and significant changes in technology. Advances in current technologies, such as VoIP (over fixed and mobile technologies), 3D TV, mobile instant messaging, wireless fidelity, or WiFi, the extension of local WiFi networks across greater distances, or WiMax, LTE, internet protocol television, or the emergence of new technologies, may result in Virgin Media's core offerings becoming less competitive or render its existing products and services obsolete. Virgin Media may not be able to develop new products and services at the same rate as its competitors or keep up with trends in the technology market as well as its competitors. The cost of implementing emerging and new technologies could be significant, and its ability to fund that implementation may depend on its ability to obtain additional financing. Similarly, the deployment of new technologies in the spectrum frequencies in which Virgin Media operates could have an impact on the existing services offered by it, with consequential impact on its businesses.

If Virgin Media does not maintain and upgrade its networks in a cost-effective and timely manner, it could lose customers.

        Maintaining an uninterrupted and high-quality service over its network infrastructure is critical to Virgin Media's ability to attract and retain customers. Providing a competitive service level will depend

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in part on its ability to maintain and upgrade its networks in a cost-effective and timely manner. The maintenance and upgrade of its networks will depend upon, among other things, its ability to:

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modify network infrastructure for new products and services, including faster broadband speeds;



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install and maintain cable and equipment; and



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finance maintenance and upgrades.

        Virgin Media's covenants in its senior credit facility effectively restrict its use of cash. If these covenants affect its ability to replace network assets at the end of their useful lives or if there is any reduction in its ability to perform necessary maintenance on network assets, its networks may have an increased failure rate, which is likely to lead to increased customer churn.

A failure in Virgin Media network and information systems could significantly disrupt its operations, and a disruption or failure of such networks or systems may disrupt its business.

        Certain network and information systems are critical to Virgin Media's business activities. Network and information systems-related events, such as theft, computer hackings, computer viruses, worms or other destructive or disruptive software, or other malicious activities, or power outages, gas build-up, fire, natural disasters, terrorist attacks, war or other similar events, could result in a degradation or disruption of its cable and non-cable services, excessive call volume to call centers or damage to its equipment and data. Virgin Media does not have a company-wide disaster recovery plan, however, it continues to develop plans for key areas of risk in the business. For example, in 2009 Virgin Media developed a business-wide continuity plan to manage significant disruptions to its business due to the threat of pandemic influenza.

        Sustained or repeated system failures that interrupt Virgin Media's ability to provide service to its customers, prevent it from billing and collecting revenue due to it, or that otherwise prevent it from meeting its obligations to its customers in a timely manner, would adversely affect its reputation and result in a loss of customers and revenue. These network and information systems-related events could also result in significant expenditures to repair or replace the damaged networks or information systems or to protect them from similar events in the future. Further, any security breaches, such as misappropriation, misuse, penetration by viruses, worms or other destructive or disruptive software, leakage, falsification or accidental release or loss of information maintained in Virgin Media's information technology systems (or those of its business partners) and networks, including customer, personnel and vendor data, could damage its reputation, result in legal and/or regulatory action against Virgin Media and require it to expend significant capital and other resources to remedy any such security breach. The occurrence of any such network or information system-related events or security breaches could have a material adverse effect on its business and results of operations.

Unauthorized access to the Virgin media network could result in a loss of revenue.

        Virgin Media relies on the integrity of its technology to ensure that its services are provided only to identifiable paying customers. In 2009, Virgin Media upgraded the conditional access system which it uses to encrypt pay television and broadband services transmitted to its customers. However, increasingly sophisticated means of illicit piracy of television and broadband services are continually being developed, including in response to evolving technologies. Billing and revenue generation for Virgin Media's pay television and broadband services rely on the proper functioning of its encryption systems. While Virgin Media continues to invest in measures to manage unauthorized access to its networks any such unauthorized access would result in a loss of revenue, and any failure to respond to security breaches could raise concerns under its agreements with content providers.

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Virgin Media relies on third-party suppliers and contractors to provide necessary hardware, software or operational support.

        Virgin Media relies on third-party vendors to supply it with a significant amount of customer equipment, hardware, software and operational support necessary to operate its network and systems and provide its services. In many cases, Virgin Media has made substantial investments in the equipment or software of a particular supplier, making it difficult for it in the short term to change supply and maintenance relationships in the event that its initial supplier is unwilling or unable to offer it competitive prices or to provide the equipment, software or support that it requires. Virgin Media is also exposed to risks associated with the potential financial instability of its suppliers, some of whom have been adversely affected by the global economic downturn. If its suppliers were to discontinue certain products, were unable to provide equipment to meet its specifications, seek to charge prices that are not competitive or interrupt the provision of equipment or services to Virgin Media, whether as a result of bankruptcy or otherwise, its business and profitability could be materially adversely affected.

        Virgin Media also relies upon a number of third—party contractors to construct and maintain its network and to install its equipment in customers' homes. Quality issues or installation or service delays relating to these contractors could result in liability, reputational harm or contribute to customer dissatisfaction, which could result in additional churn or discourage potential new customers.

Virgin Media is licensed to use the "Virgin" name and logo but does not own it.

        Virgin Media uses the "Virgin" name and logo in connection with its corporate activities and the activities of its consumer, business and a large part of its content operations under a 30-year license agreement with Virgin Enterprises Limited. The use of the Virgin name and brand carries various risks, including the following:

•

Virgin Media is substantially reliant on the general goodwill of consumers towards the Virgin brand. Consequently, adverse publicity in relation to the Virgin Group or its principals, particularly Sir Richard Branson, who is closely associated with the brand, or in relation to another Virgin name licensee, could have a material adverse effect on its business;



•

the license agreement expires in April 2036 (subject to renewal on terms to be agreed), and Virgin Media is obligated to pay a termination payment if the license is terminated early under certain circumstances; and



•

Virgin Media is required to meet certain customer service level requirements.

        The service level requirements are grouped into three key categories: (i) Base Service Levels which, in addition to ensuring that employees are fully-trained, competent, courteous and respectful, set basic standards against which to measure complaint handling, complaint levels and call center performance; (ii) Technical Service Levels which measure certain technical requirements that affect its customers' experience, such as service availability and service response times; and (iii) Aspirational Service Levels, which are levels of service that Virgin Media and Virgin Group wish to achieve over time, to create new service measures and increase the demands on certain existing measures, covering a range of matters including customer satisfaction, customer advocacy, complaint levels, call center performance and staff satisfaction.

        A failure to meet its obligations under the license agreement could lead to a termination of the license. If Virgin Media loses the right to use the Virgin brand, it would need to rebrand the affected areas of its business, which could result in increased expenditures and increased customer churn.

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Virgin Media's operating performance will depend, in part, on its ability to control customer churn.

        Customer churn is a measure of customers who stop using Virgin Media's services and controlling churn is a key element of its operational performance. Virgin Media's customer churn may increase as a result of:

•

customers moving to areas where Virgin Media cannot offer its digital television, or DTV, services;



•

the availability of competing services, some of which may, from time to time, be less expensive or technologically superior to those offered by Virgin Media or offer content that Virgin Media does not offer;



•

interruptions to the delivery of services to customers over Virgin Media's network and poor fault management;



•

a general reduction in the quality of Virgin Media's customer service; or



•

a general deterioration in economic conditions that could lead to customers being unable or unwilling to pay for Virgin Media's services.

        An increase in customer churn can lead to slower customer growth and a reduction in revenue.

Virgin Media's inability to obtain popular programming, or to obtain it at a reasonable cost, could potentially have a material adverse affect on the number of customers or reduce margins.

        For the provision of television programs and channels distributed via its cable network, Virgin Media enters into agreements with program providers, such as public and commercial broadcasters, or providers of pay or on-demand television. Virgin Media has historically obtained a significant amount of its premium programming and some of its basic programming and pay-per-view sporting events from BSkyB, one of its main competitors in the television services business. BSkyB is a leading supplier of programming to pay television platforms in the U.K. and is the exclusive supplier of some programming, including its Sky Sports channels and Sky Movie channels, which are the most popular premium subscription sports and film channels, respectively, available in the U.K. Virgin Media buys BSkyB wholesale premium content on the basis of BSkyB's rate card terms and pricing, which can be changed on 45 days' notice by BSkyB, and not under a long term supply contract.

        In addition to providing programming to Virgin Media, BSkyB competes with Virgin Media by offering its programming directly to its digital satellite customers. As a result of BSkyB's ownership of this content, it is able to charge Virgin Media a price for its content that makes it challenging for Virgin Media to compete with BSkyB's own retail pricing and still maintain a profit margin on the sale of that premium programming. BSkyB also offers content, such as HD, some sports programming and interactive content, exclusively to its digital satellite customers and not to Virgin Media. Ofcom has been conducting an investigation into the U.K. pay TV market and is expected to issue its final statement in early 2010. Ofcom's proposed remedy, if implemented, could reduce the wholesale prices Virgin Media is charged for BSkyB premium TV content and improve the availability of BSkyB HD premium content, which would enable Virgin Media to offer more competitive and innovative consumer offerings. See "Regulatory Matters—Regulation of Television Services."

        In addition to BSkyB, Virgin Media's significant programming suppliers include the BBC, ITV, Channel 4, UKTV, Five, Viacom Inc., ESPN, Discovery Communications Inc. and Turner, a division of Time Warner Inc. Virgin Media's dependence on these suppliers for television programming could have a material adverse effect on its ability to provide attractive programming at a reasonable cost. In addition, the loss of programs could negatively affect the quality and variety of the programming delivered to its customers, which could have a material adverse effect on its business and increase customer churn.

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Virgin Media may be adversely affected by a general deterioration in economic conditions.

        Virgin Media's ability to grow or maintain its business may be adversely affected by weakening global or domestic economic conditions, wavering consumer confidence, unemployment, tight credit and insurance markets, declines in global and domestic stock markets and other factors adversely affecting the global and domestic economy. In particular, the risks associated with certain segments of the Virgin Media business become more acute in periods of a slowing economy or recession. In its Content segment, a slowing economy has been accompanied by a decrease in advertising on its channels. Generally, expenditures by advertisers are sensitive to economic conditions and tend to decline in recessionary periods and other periods of uncertainty. In addition, unfavorable events in the economy, including a deterioration in the credit and equity markets, could significantly affect consumer and business demand for Virgin Media's products, as consumers may delay purchasing decisions or reduce or reallocate their discretionary funds. Virgin Media is also exposed to risks associated with the potential financial instability of its customers, suppliers, distributors and other third parties, many of whom may be adversely affected by the general economic downturn. Suppliers may also be more cautious in supplying goods to Virgin Media and may request additional credit enhancements or more restrictive payment terms. While the impact of an economic slowdown on the Virgin Media business is difficult to predict, it could result in a decline in revenue and a decrease in its cash flows.

Virgin Media may be unable to implement its operational restructuring plan successfully and realize the anticipated benefits, and this could negatively affect its financial performance.

        During the fourth quarter of 2008, Virgin Media commenced the implementation of a restructuring plan aimed at driving further improvements in its operational performance and eliminating inefficiencies in order to create a fully-integrated, customer-focused organization. The restructuring process could cause an interruption, or loss, of momentum in the activities of one or more of its businesses and the loss of key personnel. The diversion of management's attention and any delays or difficulties incurred in connection with the restructuring activity could result in the disruption of its ongoing businesses or inconsistencies in its standards, controls, product offerings, level of customer service, procedures and policies that could negatively affect its ability to maintain relationships with customers, suppliers, employees and others with whom Virgin Media has business dealings. The implementation of the plan will involve the incurrence of substantial operating and capital expenditures to achieve long term savings, including employee termination costs, lease and contract exit costs, purchases of fixed assets and other related expenses. Additional unanticipated costs may also be incurred. Although Virgin Media expects that the elimination of costs, as well as the realization of efficiencies and other benefits related to the implementation of the plan, will offset the restructuring-related costs over time, this net benefit expected may not be achieved in the near term, or at all.

Virgin Media is subject to currency and interest rate risks.

        Virgin Media is subject to currency exchange rate risks because substantially all of its revenues and operating expenses are paid in U.K. pounds sterling, but it pays interest and principal obligations with respect to a portion of its indebtedness in U.S. dollars and euros. To the extent that the pound sterling declines in value against the U.S. dollar and the euro, the effective cost of servicing its U.S. dollar and euro-denominated debt will be higher. Changes in the exchange rate result in foreign currency gains or losses.

        Virgin Media is also subject to interest rate risks. Before taking into account the impact of current hedging arrangements, as of December 31, 2009, Virgin Media would have had interest determined on a variable basis on £3,112.8 million, or 52.1%, of its long term debt. An increase in interest rates of 0.25% would increase unhedged gross interest expense by approximately £7.8 million per year.

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        To manage these currency exchange and interest rate risks, Virgin Media has entered into a number of derivative instruments, including interest rate swaps, cross-currency swaps and foreign currency forward rate contracts. Some of these hedges do not qualify as hedges under U.S. GAAP. After giving effect to these hedges, an increase in interest rates of 0.25% would increase its gross interest expense by approximately £0.3 million per year.

        Virgin Media also incurs costs in U.S. dollars, euros and South African rand, in the ordinary course of its business, such as TV programming, customer premise equipment and network maintenance services. Any deterioration in the value of the pound relative to the U.S. dollar, euro or the rand increases the effective cost of purchases made in these currencies as most of these exposures are not hedged.

Virgin Media is subject to significant regulation; changes in U.K. and EU laws, regulations or governmental policy affecting the conduct of its business may have an adverse impact on its ability to set prices, enter new markets or control its costs.

        Virgin Media's principal business activities are regulated and supervised by Ofcom and the U.K. Office of Fair Trading, among other regulators. Regulatory change is an ongoing process in the communications sector at both the U.K. and the EU level. Changes in laws, regulations or governmental policy affecting its activities and those of its competitors could significantly influence how Virgin Media operates its business and introduces new products and services. For example, regulatory changes relating to its activities and those of its competitors, such as changes relating to third party access to cable networks, the costs of interconnection with other networks or the prices of competing products and services, or any change in policy allowing more favorable conditions for other operators, could adversely affect its ability to set prices, enter new markets or control its costs. Virgin Media's ability to introduce new products and services may also be affected if it cannot predict how existing or future laws, regulations or policies would apply to such products or services. In addition, its business and the industry in which it operates are subject to investigation by regulators, which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims and damages. Any such action could harm Virgin Media's reputation and result in increased costs to the business.

There is no assurance that new products Virgin Media may introduce will achieve full functionality or market acceptance.

        Virgin Media's strategy requires that it rolls-out new products and services, such as its introduction of broadband download speeds of up to 50 Mbps across its network in 2009 and up to 100 mbps in 2010 and 2011, its current trials of broadband download speeds of up to 200 Mbps and upstream speeds of up to 10 Mbps in limited geographic areas and its development of a next generation set-top box and related services with TiVo. Virgin Media is also increasing the availability of content available via its mobile telephony platform. There is no assurance that any new product or service that it may develop will perform as expected or gain market acceptance, which could have a negative impact on its results of operations.

Virgin Media is subject to tax in more than one tax jurisdiction and its structure poses various tax risks.

        Virgin Media is subject to taxation in multiple jurisdictions, in particular, the U.S. and the U.K. Its effective tax rate and tax liability will be affected by a number of factors in addition to its operating results, including the amount of taxable income in particular jurisdictions, the tax rates in those jurisdictions, tax treaties between jurisdictions, the manner in which and extent to which it transfers funds to and repatriates funds from its subsidiaries, accounting standards and changes in accounting standards, and future changes in the law. As Virgin Media operates in more than one tax jurisdiction and may therefore incur losses in one jurisdiction that cannot be offset against income earned in a

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different jurisdiction, it may pay income taxes in one jurisdiction for a particular period even though on an overall basis it incurs a net loss for that period.

        Virgin Media has a U.S. holding company structure in which substantially all of its operations are conducted in U.K. subsidiaries that are owned by one or more members of a U.S. holding company group. As a result, although it does not expect to have current U.K. tax liabilities on its operating earnings for at least the medium term, its operations may give rise to U.S. tax on "Subpart F" income generated by its U.K. subsidiaries, or on repatriations of cash from its U.K. operating subsidiaries to the U.S. holding company group. While Virgin Media believes that it has substantial U.S. tax basis in some of its U.K. subsidiaries which may be available to avoid or reduce U.S. tax on repatriation of cash from its U.K. subsidiaries, there can be no assurance that the Internal Revenue Service, or IRS, will not seek to challenge the amount of that tax basis or that Virgin Media will be able to utilize such basis under applicable tax law. As a result, although in accordance with applicable law Virgin Media will seek to minimize its U.S. tax liability as well as its overall worldwide tax liability, it may incur U.S. tax liabilities with respect to repatriation of cash from its U.K. subsidiaries to the United States. The amount of the tax liability, if any, would depend upon a multitude of factors, including the amount of cash actually repatriated.

        Virgin Media also pays value added tax, or VAT, on its revenue generating activities in the U.K. From time to time, the U.K. tax authorities review the basis upon which Virgin Media assess its VAT liability with respect to its activities. Virgin Media is currently in a dispute with the tax authorities over two of these reviews. See Virgin Media's annual report on Form 10-K, as filed with the SEC on February 26, 2010. "Management's discussion and Analysis of financial Condition and Results of Operations—Consolidated Results of Operations—Consolidated Results of Operations for the Years Ended December 31, 2009 and 2008—Contingent Losses."

Acquisitions and other strategic transactions present many risks, and Virgin Media may not realize the financial and strategic goals that were contemplated at the time of any transaction.

        From time to time Virgin Media has made acquisitions, dispositions and has entered into other strategic transactions. In connection with such transactions, it may incur unanticipated expenses, fail to realize anticipated benefits, have difficulty integrating the acquired businesses, disrupt relationships with current and new employees, customers and suppliers, incur significant indebtedness, or have to delay or not proceed with announced transactions. These factors could harm its business and its reputation.

Virgin Media depends on the ability to attract and retain key personnel without whom it may not be able to manage its business lines effectively.

        Virgin Media operates in a number of rapidly changing technologically advanced markets that will continue to challenge its business. There is significant competition in attracting and retaining qualified personnel in the telecommunications industry, especially individuals with experience in the cable sector. Virgin Media believes that the unique combination of skills and experience possessed by its senior management would be difficult to replace, and that the loss of its key personnel could have a material adverse effect on it, including the impairment of its ability to execute its business plan. Virgin Media's future success is likely to depend in large part on its continued ability to attract and retain highly skilled and qualified personnel.

Certain of Virgin Media's significant stockholders could have an influence over its business and affairs.

        Certain persons or entities are Virgin Media's significant stockholders. Based on SEC filings as of February 25, 2010, Fidelity Management & Research Company beneficially owns 13.3% of Virgin Media's issued and outstanding common stock, the Virgin Group beneficially owns 6.5%, Capital World Investors beneficially owns 6.2%, Level Global Investors LP beneficially owns 6.1%, Wellington

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Management Company LLP beneficially owns 5.8%, and Franklin Mutual Advisers LLC beneficially owns 5.4%, of Virgin Media's issued and outstanding common stock. Each of these significant stockholders could have an influence over the business and affairs of Virgin Media.

        On April 3, 2006, Virgin Media entered into a license agreement with Virgin Enterprises Limited which provides for it to use the Virgin name and logo in its consumer and content businesses. In connection with this agreement, Virgin Enterprises Limited had the right to propose a candidate to Virgin Media's Nominating Subcommittee to fill a single seat on its board. Virgin Enterprises Limited nominated Mr. Gordon McCallum, a director of Virgin Enterprises Limited, and he was appointed to Virgin Media's board on September 11, 2006. As a result of Mr. McCallum's relationship with Virgin Enterprises Limited, if conflicts between the interests of Virgin Enterprises Limited and the interests of Virgin Media's other stockholders should arise, this director may not be disinterested.

Virgin Media does not insure the underground portion of its cable network and various pavement-based electronics associated with its cable network.

        Virgin Media obtains insurance of the type and in the amounts that it believes are customary for similar companies. Consistent with this practice, it does not insure the underground portion of its (or our) cable network or various pavement-based electronics associated with its (or our) cable network. Almost all this cable network is constructed underground. As a result, any catastrophe that affects the underground cable network or pavement-based electronics could prevent it (and us) from providing services to customers and result in substantial uninsured losses.

Virgin Media has suffered losses due to asset impairment charges for goodwill and long-lived intangible assets and could do so again in the future.

        In accordance with the Intangibles—Goodwill and Other Topic of the Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC, goodwill and indefinite-lived intangible assets are subject to annual review for impairment (or more frequently should indications of impairment arise). In addition, other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in accordance with the Property, Plant and Equipment Topic of the FASB ASC. On December 31, 2009, Virgin Media had goodwill and intangible assets of £2.3 billion. A downward revision in the fair value of a reporting unit or intangible assets could result in an impairment charge being required. For example, in 2008, Virgin Media recognized goodwill and intangible asset impairment charges of £362.2 million with respect to its former Mobile segment. Any downward revision in the fair value of Virgin Media's goodwill and intangible assets has a material effect on its reported net income.

Virgin Media has limited capacity on its cable platform.

        Virgin Media's digital television, analog television, broadband internet and VOD services are transmitted through its core and access networks, which have limited capacity. Virgin Media has plans in place to add additional capacity to its core and access networks. Until these plans are implemented, it is limited in the number of channels that can be transmitted as part of its digital television service and in its carriage of HD channels. While the planned conversion from analogue to digital technology in the U.K. will increase spectrum efficiency, thereby releasing capacity for new services, Virgin Media's current capacity limitations may affect its ability to carry new channels as they are developed. As such, Virgin Media's digital television offering may not be as competitive, which could result in an increase in customer churn and a decrease in revenue.

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Risks Relating to Virgin Media's Financial Indebtedness and Structure

Virgin Media's current leverage is substantial, which may have an adverse effect on its available cash flow, its ability to obtain additional financing if necessary in the future, its flexibility in reacting to competitive and technological changes and its operations.

        Virgin Media has consolidated total long term debt, including current portion, of £5,974.7 million as of December 31, 2009. This high degree of leverage could have important consequences, including the following:

•

a substantial portion of its cash flow from operations will have to be dedicated to the payment of interest and principal on existing indebtedness, thereby reducing the funds available for other purposes;



•

the ability of Virgin Media to obtain additional financing in the future for working capital, capital expenditures, product development, acquisitions or general corporate purposes may be impaired;



•

Virgin Media's flexibility in reacting to competitive technological and other changes may be limited;



•

the substantial degree of leverage could make Virgin Media more vulnerable in the event of a downturn in general economic conditions or adverse developments in its business; and



•

Virgin Media may be exposed to risks inherent in interest rate and foreign exchange rate fluctuations.

Virgin Media may not be able to fund its debt service obligations in the future.

        Virgin Media has significant principal payments due in 2012 under its senior credit facility that could require a partial or comprehensive refinancing of its remaining senior credit facility, and the possible use of other debt instruments. Virgin Media's ability to implement such a refinancing successfully would be significantly dependent on stable debt capital markets. In addition, it may not achieve or sustain sufficient cash flow in the future for the payment of principal or interest on its indebtedness when due. Consequently, Virgin Media may be forced to raise cash or reduce expenses by doing one or more of the following:

•

raising additional debt;



•

restructuring or refinancing its indebtedness prior to maturity, and/or on unfavorable terms;



•

selling or disposing of some of Virgin Media's assets, possibly on unfavorable terms;



•

issuing equity or equity-related instruments that will dilute the equity ownership interest of existing stockholders; or



•

foregoing business opportunities, including the introduction of new products and services, acquisitions and joint ventures.

Virgin Media cannot be sure that any of, or a combination of, the above actions would be sufficient to fund its debt service obligations, particularly in times of turbulent capital markets.

The covenants under Virgin Media's debt agreements place certain limitations on how it manages its business.

        The agreements that govern Virgin Media's indebtedness contain financial maintenance tests and restrictive covenants that limit the discretion of its management over various business matters. For

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example, the financial maintenance tests include liquidity, coverage and leverage ratios, and the restrictive covenants impact Virgin Media's ability 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 and certain vendor financing arrangements;



•

create liens;



•

enter into agreements that restrict some of Virgin Media's subsidiaries' ability to pay dividends, transfer assets or make intercompany loans;



•

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



•

enter into transactions with affiliates.

        These restrictions could materially adversely affect Virgin Media's ability to finance future operations or capital needs or to engage in other business activities that may be in its best interests. Virgin Media may also incur other indebtedness in the future that may contain financial or other covenants more restrictive than those applicable under its current indebtedness. Virgin Media cannot assure you that it will be able to remain in compliance with these covenants in the future, and, if it fails to do so, that it will be able to obtain waivers from the appropriate parties and/or amend the covenants.

Virgin Media is a holding company dependent upon cash flow from subsidiaries to meet its obligations.

        Virgin Media Inc. and a number of its subsidiaries are holding companies with no independent operations or significant assets other than investments in their subsidiaries. Each of these holding companies depends upon the receipt of sufficient funds from its subsidiaries to meet its obligations.

        The terms of Virgin Media's senior credit facility and other indebtedness limit the payment of dividends, loan repayments and other distributions to or from these companies under many circumstances. Various agreements governing the debt may restrict and, in some cases, may also prohibit the ability of these subsidiaries to move cash within their restricted group. Applicable tax laws may also subject such payments to further taxation.

        Applicable law may also limit the amounts that some of Virgin Media's subsidiaries will be permitted to pay as dividends or distributions on their equity interests, or even prevent such payments.

        The inability to transfer cash among entities within their respective consolidated groups may mean that even though the entities, in aggregate, may have sufficient resources to meet their obligations, they may not be permitted to make the necessary transfers from one entity in their restricted group to another entity in their restricted group in order to make payments to the entity owing the obligations.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        NTL South Herts owns a freehold property at 9 Greycaine Road, Watford for use as offices and to house network equipment. Other than this, we do not own or lease any properties.

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Item 3.    Legal Proceedings

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

Item 4.    Submission of Matters to a Vote of Security Holders

        There were no matters that were submitted to a vote of the holders of our limited partnership interests during the quarter ended December 31, 2009.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        While our limited partnership interests are publicly held, there is no established public trading market for the limited partnership interests, and it is not expected that such a market will develop in the future. As of March 12, 2010, the approximate number of holders of our limited partnership interests was 5,115. We have not made any distributions to our limited partners in the past, and have no present intention to do so.

Item 6.    Selected Financial Data

        The following table sets forth certain consolidated financial data as at December 31, 2009, 2008, 2007, 2006, and 2005 and for the years then ended. This information should be read in conjunction with the consolidated financial statements and notes and the information contained in our

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Management's Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere in this annual report. Historical results are not necessarily indicative of future results.

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(1)

Customer churn is calculated by taking the total number of customers disconnecting from our services during the month and dividing them by the average number of customers during the month. Average monthly churn presented is for the fourth quarter of the year and is the average of the three monthly churn calculations within the quarter.