**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**x**                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**For the quarterly period ended March 31, 2007**

**OR**

**o**                                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**Commission File No. 000-50886**

**VIRGIN MEDIA INC.**

(Exact name ofregistrant as specified in its charter)

**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED**

(AdditionalRegistrant)

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

 

**(212) 906-8440**

(Registrant’stelephone number, including area code)

Indicate by check mark whether theregistrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x No o

Indicate by check mark whether theregistrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Largeaccelerated filer x           Acceleratedfiler o           Non-acceleratedfiler o

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

APPLICABLE ONLY TO ISSUERS INVOLVED INBANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether theregistrant has filed all documents and reports required to be filed bySections 12, 13 or 15(d) of the Securities Exchange Act of 1934subsequent to the distribution of securities under a plan confirmed by acourt. Yes x No o

The number of shares outstanding of theregistrant’s common stock as of May 7, 2007 was 327,516,460.

The Additional Registrant meets the conditions set forth in GeneralInformation H(1)(a) and (b) of Form 10-Q and is filingthis report with the reduced disclosure format. See “Note Concerning VMIH” inthis Form 10-Q.

 

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**VIRGIN MEDIA INC.FORM 10-QQUARTER ENDED MARCH 31, 2007INDEX**

|                                                                                                            | ** ** | **Page** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| PART I.  FINANCIAL INFORMATION                                                                        |       | 5        |       |
| Item  1. Financial Statements                                                                              |       | 5        |       |
| **Virgin Media Inc.**                                                                                      |       |     |       |
| Condensed  Consolidated Balance Sheets—March 31, 2007 and December 31, 2006                 |       | 5        |       |
| Condensed Consolidated Statements of Operations—Three  months ended March 31, 2007 and 2006 |       | 6        |       |
| Condensed Consolidated Statements of Cash Flows—Three  months ended March 31, 2007 and 2006 |       | 7        |       |
| Notes to Condensed Consolidated Financial Statements                                                       |       | 8        |       |
| **Virgin Media Investment  Holdings Limited**                                                              |       |     |       |
| Condensed Consolidated Balance Sheets—March 31,  2007 and December 31, 2006                 |       | 20       |       |
| Condensed Consolidated Statements of Operations—Three  months ended March 31, 2007 and 2006 |       | 21       |       |
| Condensed Consolidated Statements of Cash Flows—Three  months ended March 31, 2007 and 2006 |       | 22       |       |
| Notes to Condensed Consolidated Financial Statements                                                       |       | 23       |       |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations        |       | 30       |       |
| Item 3. Quantitative and Qualitative Disclosures about  Market Risk                                        |       | 44       |       |
| Item 4. Controls and Procedures                                                                            |       | 44       |       |
| PART II.  OTHER INFORMATION                                                                           |       | 46       |       |
| Item  1. Legal Proceedings                                                                                 |       | 46       |       |
| Item  1A. Risk Factors                                                                                     |       | 46       |       |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                       |       | 46       |       |
| Item 3. Defaults Upon Senior Securities                                                                    |       | 46       |       |
| Item 4. Submission of Matters to a Vote of Security  Holders                                               |       | 46       |       |
| Item  5. Other Information                                                                                 |       | 46       |       |
| Item 6.  Exhibits                                                                                          |       | 46       |       |
| SIGNATURES                                                                                                 |       | 47       |       |

 

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**“SafeHarbor” Statement under the Private Securities Litigation Reform Act of 1995:**

Variousstatements contained in this document constitute “forward-lookingstatements” as that term is defined under the Private Securities LitigationReform Act of 1995. Words like “believe,” “anticipate,” “should,” “intend,” “plan,”“will,” “expects,” “estimates,” “projects,” “positioned,” “strategy,” andsimilar expressions identify these forward-looking statements, whichinvolve known and unknown risks, uncertainties and other factors that may causeour actual results, performance or achievements or industry results to bematerially different from those contemplated, projected, forecasted, estimatedor budgeted, whether expressed or implied, by these forward-lookingstatements. These factors, among others, include:

·       theability to compete with a range of other communications and content providers;

·       theability to control customer churn;

·       the effectof technological changes on our businesses;

·       thecontinued right to use the Virgin name and logo;

·       theability to maintain and upgrade our networks in a cost-effective and timelymanner;

·       possiblelosses in revenues due to systems failures;

·       theability to provide attractive programming at a reasonable cost;

·       thereliance on single-source suppliers for some equipment, software andservices and third party distributors of our mobile services;

·       thefunctionality or market acceptance of new products that we may introduce;

·       theability to obtain and retain expected synergies from the merger of our legacyNTL and Telewest businesses and the acquisition of Virgin Mobile;

·       rates ofsuccess in executing, managing and integrating key acquisitions, including themerger with Telewest and the acquisition of Virgin Mobile;

·       the abilityto achieve business plans for the combined company;

·       theability to fund debt service obligations through operating cash flow;

·       theability to obtain additional financing in the future and react to competitiveand technological changes;

·       theability to comply with restrictive covenants in our indebtedness agreements;and

·       the extentto which our future earnings will be sufficient to cover our fixed charges.

These and otherfactors are discussed in more detail under Item 1A. “Risk Factors” and elsewherein our Form 10-K filed with the SEC on March 1, 2007. We assumeno obligation to update our forward-looking statements to reflect actualresults, changes in assumptions or changes in factors affecting thesestatements.

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**Note Concerning Corporate Name Changes**

We entered into a license agreement with Virgin Enterprises Limitedunder which we are licensed to use certain Virgin trademarks within the UnitedKingdom and the Republic of Ireland. As a result, in February 2007, werebranded our consumer business and a large part of our content business to “VirginMedia”. We also changed the name of our corporate parent from NTL Incorporatedto Virgin Media Inc. and the corporate names of certain of our subsidiaries,including:

·       NTLInvestment Holdings Limited, the principal borrower under our senior creditfacility, to Virgin Media Investment Holdings Limited;

·       NTL CablePLC, the issuer of our public bonds, to Virgin Media Finance PLC;

·       NTL GroupLimited, a principal operating subsidiary, to Virgin Media Limited;

·       FlextechTelevision Limited, our content subsidiary, to Virgin Media Television Limited;

·       NTLCommunications Limited to Virgin Media Communications Limited; and

·       NTLHoldings Inc. to Virgin Media Holdings Inc.

For thepurposes of this quarterly report on Form 10-Q, the new names will be usedwhere applicable. In this quarterly report, unless we have indicated otherwise,or the context otherwise requires, references to:

·       “VirginMedia,” “the Company,” “we,” “us,” “our” and similar terms refer to VirginMedia Inc. and its subsidiaries (which include Telewest Global, Inc., orTelewest, and its subsidiaries and Virgin Mobile and its subsidiaries);

·       “NTL”refers to NTL Incorporated and its subsidiaries as they existed prior to thename change to Virgin Media Inc., and prior to the merger with Telewest, refersto the company now known as Virgin Media Holdings Inc. (which was formerlyknown as NTL Incorporated before the merger); and

·       “Telewest”refers to Telewest Global, Inc. and its subsidiaries as they existed priorto the merger with NTL in March 2006.

**Note Concerning VMIH**

This quarterly report on Form 10-Q(excepting financial statements responsive to Part I, Item 1) covers bothVirgin Media Inc. and Virgin Media Investment Holdings Limited (“VMIH’’), anEnglish company with an address at 160 Great Portland Street, London, W1W 5QA,United Kingdom, that is a wholly-owned subsidiary of Virgin Media Finance PLCand a wholly-owned indirect subsidiary of Virgin Media Inc. VMIH is not anaccelerated filer. VMIH is one of the guarantors of Virgin Media Finance PLC’s9.75% senior notes due 2014 (sterling denominated), 8.75% senior notes due 2014(euro denominated), 8.75% senior notes due 2014 (U.S. dollar denominated), and9.125% senior notes due 2016 (U.S. dollar denominated). VMIH’s guarantee of thesenotes is not deemed to be unconditional.

VMIH carries on the same business as VirginMedia Inc., and is the principal borrower under Virgin Media Inc.’s seniorcredit facility. In this quarterly report, unless the context otherwiserequires, the terms “Virgin Media,” “the “Company,” “we,” “us,” “our” andsimilar terms refer to the consolidated business of Virgin Media Inc.,including VMIH and its subsidiaries. Unless otherwise indicated, the discussioncontained in this report applies to VMIH as well as Virgin Media Inc.

**Note Concerning Financial Information andCurrency of Financial Statements**

All of the financial statements included in thisquarterly report have been prepared in accordance with U.S. generally acceptedaccounting principles, or GAAP. The reporting currency of our consolidatedfinancial statements is U.K pounds sterling.

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**PART I—FINANCIALINFORMATION**

**ITEM 1.**                FINANCIALSTATEMENTS

**VIRGIN MEDIA INC.CONDENSED CONSOLIDATED BALANCE SHEETS (in millions)**

| ** **                                                                                                        | ** ** | **March 31,  2007**                | ** ** | ** December 31,   2006** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                                                        | ** ** | **  (Unaudited)  ** | ** ** | **(See Note)**                     | ** ** |
| **Assets**                                                                                                        | ** ** |                                    | ** ** | ** **                              |       |   | ** ** | ** ** |   |
| Current assets                                                                                                    |       |                                    |       |                                    |       |   |   |   |   |
| Cash and cash equivalents                                                                                         |       |                                    | £     | 365.1                                   |       |   |   | £ | 418.5 |   |   |
| Restricted cash                                                                                                   |       |                                    | 5.9        |                                    |       |   | 6.0 |   |   |
| Accounts receivable—trade, less allowances for  doubtful accounts of £33.9 (2007) and £51.8 (2006) |       |                                    | 440.8      |                                    |       |   | 461.2 |   |   |
| Inventory                                                                                                         |       |                                    | 88.6       |                                    |       |   | 65.3 |   |   |
| Prepaid expenses and other current assets                                                                         |       |                                    | 88.5       |                                    |       |   | 87.4 |   |   |
| Total current assets                                                                                              |       |                                    | 988.9      |                                    |       |   | 1,038.4 |   |   |
| Fixed assets, net                                                                                                 |       |                                    | 5,951.8    |                                    |       |   | 6,026.3 |   |   |
| Goodwill and other  indefinite-lived intangible assets                                                            |       |                                    | 2,506.4    |                                    |       |   | 2,516.5 |   |   |
| Intangible assets,  net                                                                                           |       |                                    | 1,044.9    |                                    |       |   | 1,120.5 |   |   |
| Equity investments                                                                                                |       |                                    | 373.5      |                                    |       |   | 371.5 |   |   |
| Other assets, net  of accumulated amortization of £27.7 (2007) and £21.8 (2006)                         |       |                                    | 173.9      |                                    |       |   | 170.3 |   |   |
| **Total  assets**                                                                                                 |       |                                    | £     | 11,039.4                                |       |   |   | £ | 11,243.5 |   |   |
| **Liabilities  and shareholders’ equity**                                                                    | ** ** |                                    | ** ** | ** **                              |       |   | ** ** | ** ** |   |
| Current liabilities                                                                                               |       |                                    |       |                                    |       |   |   |   |   |
| Accounts payable                                                                                                  |       |                                    | £     | 381.0                                   |       |   |   | £ | 379.6 |   |   |
| Accrued expenses and other current liabilities                                                                    |       |                                    | 428.7      |                                    |       |   | 485.5 |   |   |
| VAT and employee taxes payable                                                                                    |       |                                    | 87.8       |                                    |       |   | 82.8 |   |   |
| Restructuring liabilities                                                                                         |       |                                    | 118.6      |                                    |       |   | 126.8 |   |   |
| Interest payable                                                                                                  |       |                                    | 121.7      |                                    |       |   | 158.2 |   |   |
| Deferred revenue                                                                                                  |       |                                    | 263.3      |                                    |       |   | 268.0 |   |   |
| Current portion of long-term debt                                                                                 |       |                                    | 27.8       |                                    |       |   | 141.9 |   |   |
| Total current liabilities                                                                                         |       |                                    | 1,428.9    |                                    |       |   | 1,642.8 |   |   |
| Long-term debt,  net of current portion                                                                           |       |                                    | 6,131.5    |                                    |       |   | 6,017.2 |   |   |
| Deferred revenue  and other long-term liabilities                                                                 |       |                                    | 271.1      |                                    |       |   | 276.2 |   |   |
| Deferred income  taxes                                                                                            |       |                                    | 70.9       |                                    |       |   | 77.2 |   |   |
| Total liabilities                                                                                                 |       |                                    | 7,902.4    |                                    |       |   | 8,013.4 |   |   |
| Commitments and  contingent liabilities                                                                           |       |                                    |       |                                    |       |   |   |   |   |
| Minority interest                                                                                                 |       |                                    | —     |                                    |       |   | — |   |   |
| Shareholders’ equity                                                                                         |       |                                    |       |                                    |       |   |   |   |   |
| Common stock                                                                                                      |       |                                    | 1.8        |                                    |       |   | 1.8 |   |   |
| Additional paid-in capital                                                                                        |       |                                    | 4,310.9    |                                    |       |   | 4,303.4 |   |   |
| Accumulated other comprehensive income                                                                            |       |                                    | 139.0      |                                    |       |   | 116.0 |   |   |
| Accumulated deficit                                                                                               |       |                                    | (1,314.7   | )                                       |       |   | (1,191.1 | ) |   |
| Total shareholders’ equity                                                                                   |       |                                    | 3,137.0    |                                    |       |   | 3,230.1 |   |   |
| **Total liabilities and  shareholders’ equity**                                                              |       |                                    | £     | 11,039.4                                |       |   |   | £ | 11,243.5 |   |   |

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Note: The balancesheet at December 31, 2006 has been derived from the audited financialstatements at that date.

See accompanying notes.

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**VIRGIN MEDIA INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

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

| ** **                                                                                                                            | ** ** | **Three months ended  March 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                            | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| **Revenue**                                                                                                                           |       | £                                           | 1,021.9    |   | £ | 611.4 |   |
| **Costs and expenses**                                                                                                                | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Operating costs (exclusive of depreciation shown  separately below)                                                                   |       | 449.3                                            |       | 254.9 |   |
| Selling, general and administrative expenses                                                                                          |       | 266.9                                            |       | 158.1 |   |
| Other charges                                                                                                                         |       | 11.6                                             |       | 8.4 |   |
| Depreciation                                                                                                                          |       | 232.1                                            |       | 149.3 |   |
| Amortization                                                                                                                          |       | 77.3                                             |       | 36.8 |   |
|                                                                                                                                  |       | 1,037.2                                          |       | 607.5 |   |
| **Operating  (loss) income**                                                                                                          |       | (15.3                                            | )          | 3.9 |   |
| **Other income (expense)**                                                                                                            | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Interest income and other, net                                                                                                        |       | 7.0                                              |       | 8.6 |   |
| Interest expense                                                                                                                      |       | (118.5                                           | )          | (83.8 | ) |
| Share of income from equity investments                                                                                               |       | 7.2                                              |       | 1.4 |   |
| Foreign currency transaction gains (losses)                                                                                           |       | 3.3                                              |       | (10.0 | ) |
| Loss on extinguishment of debt                                                                                                        |       | —                                           |       | (32.4 | ) |
| Losses on derivative instruments                                                                                                      |       | (0.5                                             | )          | (9.2 | ) |
| **Loss  before income taxes, minority interest and cumulative effect of change in  accounting principle**                             |       | (116.8                                           | )          | (121.5 | ) |
| Income tax  expense                                                                                                                   |       | (3.5                                             | )          | — |   |
| Minority interest                                                                                                                     |       | —                                           |       | 0.4 |   |
| Cumulative effect  of change in accounting principle                                                                                  |       | —                                           |       | 1.2 |   |
| **Net  loss**                                                                                                                         |       | £                                           | (120.3     | ) | £ | (119.9 | ) |
| **Basic and diluted loss before income taxes,  minority interest and cumulative effect of change in accounting principle per  share** |       | £                                           | (0.37      | ) | £ | (0.51 | ) |
| **Basic  and diluted cumulative effect of change in accounting principle  per share**                                                 |       | £                                           | —     |   | £ | — |   |
| **Basic  and diluted net loss per share**                                                                                             |       | £                                           | (0.37      | ) | £ | (0.51 | ) |
| **Dividends  per share**                                                                                                              |       | £                                           | 0.01       |   | £ | — |   |
| **Average number of shares  outstanding**                                                                                             |       | 324.2                                            |       | 236.5 |   |

 

See accompanying notes.

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**VIRGIN MEDIA INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited) (in millions)**

| ** **                                                                 | ** ** | **Three months ended  March 31,** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| **Net  cash provided by operating activities**                             |       | £                                           | 106.0      |   | £ | 207.3 |   |
| **Investing activities**                                                   | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Purchase of fixed and intangible assets                                    |       | (152.6                                           | )          | (135.3 | ) |
| Acquisitions, net of cash acquired                                         |       | (1.0                                             | )          | (1,999.2 | ) |
| Other                                                                      |       | 5.7                                              |       | 9.8 |   |
| Net cash used in investing activities                                      |       | (147.9                                           | )          | (2,124.7 | ) |
| **Financing activities**                                                   | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| New borrowings, net of financing fees                                      |       | (0.1                                             | )          | 4,920.0 |   |
| Principal payments on long-term debt and  capital leases                   |       | (7.5                                             | )          | (3,241.3 | ) |
| Other                                                                      |       | (2.9                                             | )          | 27.2 |   |
| Net cash (used in) provided by financing activities                        |       | (10.5                                            | )          | 1,705.9 |   |
| Effect of  exchange rate changes on cash and cash equivalents              |       | (1.0                                             | )          | (5.4 | ) |
| Decrease in cash  and cash equivalents                                     |       | (53.4                                            | )          | (216.9 | ) |
| Cash and cash  equivalents, beginning of period                            |       | 418.5                                            |       | 735.2 |   |
| Cash and cash  equivalents, end of period                                  |       | £                                           | 365.1      |   | £ | 518.3 |   |
| **Supplemental  disclosure of cash flow information**                      | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Cash paid during the  period for interest exclusive of amounts capitalized |       | 155.0                                            |       | 65.5 |   |

 

See accompanying notes.

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**VIRGIN MEDIA INC.**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**Note 1—Basisof Presentation**

The accompanying unaudited condensedconsolidated financial statements have been prepared in accordance with U.S.generally accepted accounting principles for interim financial information andwith the rules and regulations of the Securities and Exchange Commission.Accordingly, they do not include all of the information and notes required byU.S. generally accepted accounting principles for complete financialstatements. In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded. Operating results for the three months ended March 31, 2007 arenot necessarily indicative of the results that may be expected for the yearending December 31, 2007. For further information, refer to theconsolidated financial statements and notes thereto included in the AnnualReport on Form 10-K for Virgin Media Inc. for the year ended December 31,2006.

On March 3, 2006, Virgin MediaHoldings Inc, or Virgin Media Holdings (then known as NTL Incorporated), mergedwith a subsidiary of Virgin Media Inc., or Virgin Media (then known as TelewestGlobal, Inc., or Telewest). The merger has been accounted for as a reverseacquisition in which Virgin Media Holdings is treated as the accountingacquirer, primarily because Virgin Media Holdings’ shareholders owned 75% ofthe common stock upon completion of the merger. Following the merger, Telewestchanged its name to NTL Incorporated, and subsequently to Virgin Media Inc. Asa result, the historical financial statements of Virgin Media Holdings becamethe historical financial statements of Virgin Media Inc. as of the completionof the merger. Therefore, the results of operations and cash flows forTelewest, the acquired company for accounting purposes, are included in theconsolidated financial statements from March 3, 2006, the date on whichthe merger was completed. The results of operations and cashflows for VirginMobile (as defined below) are included in the consolidated financial statementsfrom July 4, 2006, the date of its acquisition.

Certain prioryear balances have been reclassified to conform to the current periodpresentation.

**Note 2—Acquisitions**

*Acquisitionof Virgin Mobile*

On July 4, 2006, we acquired 100% ofthe outstanding shares and options of Virgin Mobile Holdings (UK) plc (“VirginMobile”) through a U.K. Scheme of Arrangement. Virgin Mobile is the largestmobile virtual network operator in the United Kingdom, with approximately 4.5million customers.

The totalpurchase price of £953.2 million included cash of £419.2 million, commonstock valued at £518.8 million and estimated direct transaction costs of£15.2 million. We financed the cash portion of the offer and transactionalexpenses through £475 million of additional borrowings under our senior creditfacility and cash on hand.

*ReverseAcquisition of Telewest*

On March 3, 2006, Virgin MediaHoldings Inc. (then known as NTL Incorporated) merged with a subsidiary of VirginMedia Inc. (then known as Telewest Global, Inc.) and the merger has beenaccounted for as a reverse acquisition of Telewest using the purchase method.This merger created one of the U.K.’s largest providers of residentialbroadband and the U.K.’s leading provider of “triple-play” services. Inconnection with this transaction, Telewest changed its name to NTLIncorporated, and has since changed its name to Virgin Media Inc.

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

The totalpurchase price of £3.5 billion included cash of £2.3 billion, commonstock valued at £1.1 billion, stock options with a fair value of£29.8 million and estimated direct transaction costs of £25.1 million.During the three months ended March 31, 2007, we reduced goodwill by £8.1million for amendments to deferred tax liabilities that were recognized at theacquisition date.

*ProForma Results*

The followingpro forma financial information for the three months ended March 31, 2006presents the combined results of operations of Virgin Media Holdings, theformer Telewest and Virgin Mobile businesses as if the acquisitions hadoccurred as of the beginning of the period presented (in millions, except pershare data). The unaudited pro forma financial information is not intended torepresent or be indicative of the consolidated results of operations orfinancial condition of Virgin Media that would have been reported had theacquisitions been completed as of the date presented, and should not be takenas representative of the future consolidated results of operations or financialcondition of Virgin Media.

| ** **                                                                                            | ** ** | **Three months ended  March 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                            | ** ** | **2007  Actual**                                 | ** ** | **2006  Pro forma** | ** ** |
| Revenue                                                                                               |       | £                                           | 1,021.9    |   |   | £ | 1,023.3 |   |   |
| Operating  (loss) income                                                                              |       | (15.3                                            | )          |   | 30.4 |   |   |
| Loss  before income taxes, minority interest and cumulative effect of change in  accounting principle |       | (116.8                                           | )          |   | (121.0 | ) |   |
| Loss  before cumulative effect of change in accounting principle                                      |       | (120.3                                           | )          |   | (130.9 | ) |   |
| Cumulative  effect of change in accounting principle                                                  |       | —                                           |       |   | 1.2 |   |   |
| Net  loss                                                                                             |       | £                                           | (120.3     | ) |   | £ | (129.7 | ) |   |
| Net loss per  share                                                                                   |       | £                                           | (0.37      | ) |   | £ | (0.42 | ) |   |

 

The pro formafinancial information above includes the following material, non-recurringcharges in the three months ended March 31, 2006: write-offs of historicaldeferred finance charges of £32.4 million; acquisition-related charges of £16.3million; and other charges including restructuring charges of £8.9 million.

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

**Note 3—LongTerm Debt**

Long term debt consists of (in millions):

| ** **                                | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| 8.75%  U.S. Dollar senior notes due 2014  |       |               | £     | 215.9                 |       |   |   | £ | 217.0 |   |   |
| 9.75%  Sterling senior notes due 2014     |       |               | 375.0      |                  |       |   | 375.0 |   |   |
| 8.75%  Euro senior notes due 2014         |       |               | 152.9      |                  |       |   | 151.6 |   |   |
| 9.125%  U.S. Dollar senior notes due 2016 |       |               | 279.4      |                  |       |   | 280.8 |   |   |
| Senior  credit facility                   |       |               | 5,025.8    |                  |       |   | 5,024.6 |   |   |
| Capital  leases                           |       |               | 104.9      |                  |       |   | 104.4 |   |   |
| Other                                     |       |               | 5.4        |                  |       |   | 5.7 |   |   |
|                                      |       |               | 6,159.3    |                  |       |   | 6,159.1 |   |   |
| Less:  current portion                    |       |               | (27.8      | )                     |       |   | (141.9 | ) |   |
|                                      |       |               | £     | 6,131.5               |       |   |   | £ | 6,017.2 |   |   |

 

The effective interest rate on the seniorcredit facility was 7.4% and 7.1% as at March 31, 2007 and December 31,2006, respectively.

On April 13,2007, we borrowed £890 million under our senior credit facility which will berepayable in 2012, and used £863 million of the net proceeds to repay some ofour obligations under our senior credit facility that were originally scheduledto be paid in 2007 through 2011.

**Note 4—EmployeeBenefit Plans**

The componentsof net periodic pension cost in the three months ended March 31, 2007 and2006 were as follows (in millions):

| ** **                      | ** ** | **Three months  ended  March 31,** | ** ** |
|---------------------------------|------------|----------------------------------------------|------------|
| ** **                      | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| Service  costs                  |       | £                                       | 0.6        |   | £ | 0.7 |   |
| Interest  costs                 |       | 4.2                                          |       | 3.9 |   |
| Expected  return on plan assets |       | (4.8                                         | )          | (4.2 | ) |
| Settlements  and curtailments   |       | —                                       |       | 0.3 |   |
| Net periodic  benefit costs     |       | £                                       | —     |   | £ | 0.7 |   |

 

*EmployerContributions*

We previouslydisclosed in our financial statements for the year ended December 31, 2006that we expected to contribute £9.3 million to our pension plans in 2007. In April 2007,we agreed with the trustees of one of our pension plans to a new fundingarrangement whereby we will be paying an additional £3.3 million per annum forthe next three years. Additionally, we are seeking to effect a merger ofour three other defined benefit plans. The merger of these plans is subject tothe approval of the trustees. As a condition of trustee approval, we haveagreed to make a specific one-time contribution of £4.5 million. For 

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

thethree months ended March 31, 2007, we contributed £0.8 million to ourpension plans. Reflecting the changes referenced above, we anticipatecontributing an additional £16.3 million to fund our pension plans in 2007for a total of £17.1 million.

**Note 5—OtherCharges Including Restructuring Charges**

Other charges of £11.6 million and£8.4 million for the three months ended March 31, 2007 and 2006,respectively, relate mainly to lease exit and employee termination costs as aresult of our acquisition-related restructuring programs.

The followingtables summarize our historical restructuring provisions and the restructuringprovisions resulting from the acquisitions during 2006 (in millions):

| **Historical Restructuring Provisions** | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance,  December 31, 2006                  |       |       | £     | —                                                          |       |                   | £     | 43.4      |       | £ | 43.4 |   |
| Charged  to expense                               |       |       | —     |                                                            |       | 1.8                    |       | 1.8       |       |
| Utilized                                          |       |       | —     |                                                            |       | (4.3                   | )          | (4.3      | )          |
| Balance,  March 31, 2007                     |       |       | £     | —                                                          |       |                   | £     | 40.9      |       | £ | 40.9 |   |

 

| **Acquisition Restructuring Provisions** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| Balance,  December 31, 2006                   |       |       | £     | 18.7       |       |       | £     | 64.7       |       | £     | 83.4       |   |
| Charged  to expense                                |       |       | 3.3        |       |       | 6.5        |       | 9.8        |       |
| Utilized                                           |       |       | (12.1      | )          |       | (3.4       | )          | (15.5      | )          |
| Balance,  March 31, 2007                      |       |       | £     | 9.9        |       |       | £     | 67.8       |       | £     | 77.7       |   |

 

**Note 6—Stockholders’Equity and Share Based Compensation**

On February 27, 2007, our Board ofDirectors approved and declared the payment of a regular quarterly cashdividend of $0.02 per share on March 20, 2007 to stockholders of record asof March 12, 2007, totaling £3.3 million. Future payments of regularquarterly dividends by us are at the discretion of our Board of Directors andwill be subject to our future needs and uses of cash, which could includeinvestments in operations, the repayment of debt, and share repurchaseprograms.

As at March 31, 2007, we hadauthorized shares totaling one billion and issued and outstanding sharestotaling 326.6 million. As at March 31, 2006, we had authorized sharestotaling one billion and issued and outstanding shares totaling 288.1 million.

Basic anddiluted net loss per share is computed by dividing the net loss for the threemonths ended March 31, 2007 and 2006 by the weighted average number ofshares outstanding during the respective periods. Outstanding warrants, optionsto purchase shares and restricted stock totaling 38.3 million and38.5 million shares at March 31, 2007 and 2006, respectively, areexcluded from the calculation of diluted loss per share, since the inclusion ofsuch warrants, options and shares of restricted stock is anti-dilutive. 

11

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

The average number of shares outstandingfor the three months ended March 31, 2007 is computed as follows (inmillions):

| ** **                                       | ** ** | **Three months  ended  March 31,** | ** ** |
|--------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                       | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| Number  of shares outstanding at start of period |       | 323.9                                        |       | 212.9 |   |
| Issues  of common stock                          |       | 0.3                                          |       | 23.6 |   |
| Average  shares outstanding                      |       | 324.2                                        |       | 236.5 |   |

 

The followingtable summarizes the activity of our option plans for the three months ended March 31,2007.

| ** **                                  | ** ** | **Options to  purchase  common stock** | ** ** | **Weighted average  exercise price** | ** ** |
|---------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------|------------|
| Outstanding  at the beginning of the period |       |                                             | 13,055,630 |                                           |       |   | $ | 19.31 |   |   |
| Granted                                     |       |                                             | 213,532    |                                           |       |   | $ | 27.02 |   |   |
| Exercised                                   |       |                                             | (403,272   | )                                              |       |   | $ | 10.99 |   |   |
| Forfeited,  expired or cancelled            |       |                                             | (318,068   | )                                              |       |   | $ | 26.89 |   |   |
| Outstanding  at the end of the period       |       |                                             | 12,547,822 |                                           |       |   | $ | 19.52 |   |   |
| Exercisable  at the end of the period       |       |                                             | 5,757,284  |                                           |       |   | $ | 15.38 |   |   |

 

We have adopted Statement of FinancialAccounting Standards (SFAS) No. 123 (revised 2004), *Share-BasedPayment,* effective January 1, 2006. As a result, during thethree months ended March 31, 2006, we recorded a cumulative effect of achange in accounting principle of £1.2 million to reduce compensationexpense recognized in previous periods.

Total share based compensation expenseincluded in selling, general and administrative expenses in the statement ofoperations was £7.1 million and £6.3 million for the three monthsended March 31, 2007 and 2006, respectively.

The followingtable summarizes the activity of our restricted stock plans for the threemonths ended March 31, 2007.

| ** **                                  | ** ** | **Common stock** | ** ** |
|---------------------------------------------|------------|-----------------------|------------|
| Outstanding  at the beginning of the period |       |                  | 2,435,396  |   |   |
| Granted                                     |       |                  | —     |   |   |
| Awards  vested and shares issued            |       |                  | (382,913   | ) |   |
| Forfeited,  expired or cancelled            |       |                  | (20,833    | ) |   |
| Outstanding  at the end of the period       |       |                  | 2,031,650  |   |   |

 

12

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

**Note 7—ComprehensiveLoss**

Comprehensive loss comprises (in millions):

| ** **                                    | ** ** | **Three months  ended March 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Net loss for  period                          |       | £                                           | (120.3     | ) | £ | (119.9 | ) |
| Currency  translation adjustment              |       | (0.4                                             | )          | (17.0 | ) |
| Net  unrealized gains (losses) on derivatives |       | 23.4                                             |       | (1.2 | ) |
| Comprehensive loss                            |       | £                                           | (97.3      | ) | £ | (138.1 | ) |

 

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

| ** **                           | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Foreign  currency translation        |       |                     | £     | 131.2                       |       |   |   | £ | 131.6 |   |   |
| Pension  liability adjustments       |       |                     | (20.0      | )                           |       |   | (20.0 | ) |   |
| Net  unrealized gains on derivatives |       |                     | 27.8       |                        |       |   | 4.4 |   |   |
|                                 |       |                     | £     | 139.0                       |       |   |   | £ | 116.0 |   |   |

 

**Note 8—Incometaxes**

At each period end, it is necessary for usto make certain estimates and assumptions to compute the provision for incometaxes including, but not limited to, the expected operating income (or loss)for the year, projections of the proportion of income (or loss) earned andtaxed in the United Kingdom and the extent to which this income (or loss) mayalso be taxed in the United States, permanent and temporary differences, thelikelihood of deferred tax assets being recovered and the outcome of contingenttax risks. At each interim period, management uses the best informationavailable to develop these estimates and assumptions, which are used to computethe forecast effective tax rate for the full year which is applied in computingthe income tax expense or benefit for the interim period. In accordance with U.S.generally accepted accounting principles, the impact of revisions to these estimatesare recorded as income tax expense or benefit in the period in which theybecome known. Accordingly, the accounting estimates used to compute theprovision for income taxes have changed and will change as new events occur, asmore experience is acquired, as additional information is obtained and our taxenvironment changes. To the extent that the estimate changes during asubsequent quarter, the effect of the change on prior quarters as well as onthe current quarter is included in income tax expense for the current quarter.

For the three months ended March 31,2007, income tax expense was £3.5 million as compared with £nil for the sameperiod in 2006. The tax expense for the three months ended March 31, 2007was comprised of current federal taxes of £0.3 million, a U.S. state and localtax benefit of £0.6 million, deferred federal tax expense of £5.1 million and aU.K. tax benefit of £1.3 million. The U.K.tax benefit relates to amounts receivable in respect of the sale of U.K. taxlosses to an equity-method investee.

In June 2006, the FASB issued FASBInterpretation (“FIN”) No. 48, *Accounting for Uncertaintyin Income Taxes—an interpretation of FASB Statement 109*. FIN 48prescribes a comprehensive model for recognizing, measuring, presenting anddisclosing in the financial statements tax positions taken or expected to betaken on a tax return, including a decision whether to file or not to file in aparticular 

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

jurisdiction. Weadopted FIN 48 on January 1, 2007. The adoption did not have a materialeffect on our consolidated financial statements. Upon the adoption of FIN 48,we had £70.9 million of unrecognized tax benefits. If subsequently recognized,£66.5 million would not impact the effective tax rate due to an offsettingvaluation allowance, of the remainder £1.1 million would decrease income taxexpense and £3.3 million would reduce goodwill. In addition, we had accrued £0.6million for interest. We recognize interest and penalties related tounrecognized tax benefits in income tax expense.

During the quarter ended March 31,2007, we recognized £53.9 million of previously unrecognized tax benefitsdue to a change in facts and circumstances. This had no impact on the effectivetax rate due to an offsetting valuation allowance. We also recognized £0.2 millionof previously unrecognized tax benefits as a result of the expiry of theapplicable statute of limitations, together with £0.4 million of accruedinterest thereon. We do not expect that the amount of unrecognized tax benefitswill significantly increase or decrease in the next twelve months.

The statute of limitations is open for theyears 2003 to 2006 in the U.S. and the U.K., our major tax jurisdictions.

The U.K. hasproposed changes in tax legislation that may impact our future U.K. taxposition. These changes include a reduction in the rate of taxation from 30% to28%, and a reduction in the rate at which capital allowances can be claimed ina year from 25% to 20%, with both changes coming into effect on April 1, 2008.Under FAS 109, *Accounting for Income Taxes,* theeffect of such changes on deferred tax balances are required to be recognizedin the period in which the new legislation is enacted. It is expected thelegislation will be enacted in the third quarter of 2007. Our deferred taxassets are fully covered by a valuation allowance, such that no impact isexpected to be recorded when it is enacted. There may be an impact in a futureperiod, to the extent a deferred tax benefit is recognized.

**Note 9—RecentAccounting Pronouncements**

InSeptember 2006, the FASB issued SFAS No. 157, *Fair ValueMeasurements.* SFAS 157 provides guidance for using fair valueto measure assets and liabilities. It also responds to investors’ requests forexpanded information about the extent to which companies measure assets andliabilities at fair value, the information used to measure fair value, and theeffect of fair value measurements on earnings. SFAS 157 applies wheneverother standards require (or permit) assets or liabilities to be measured atfair value, and does not expand the use of fair value in any new circumstances.SFAS 157 is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007 and is required to be adopted by us inthe first quarter of 2008. We are currently evaluating the effect that theadoption of SFAS 157 will have on our consolidated results of operationsand financial condition and are not yet in a position to determine sucheffects.

**Note 10—IndustrySegments**

Our reportable segments Cable, Content and Mobile are based on our methodof internal reporting. Our primary business segment is our Cable segment, whichconsists of our television, broadband and fixed line telephone services sold onour cable network and, to a lesser extent, off our cable network. We operate aContent segment through our wholly-owned subsidiaries Virgin Media TelevisionLimited (“Virgin Media TV’’, formerly known as Flextech Limited) and sit-upLimited (“sit-up”), which supply television programming to the U.K.pay-television broadcasting market including our televised shopping unit sit-up

14

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

tv, whichmarkets and retails a wide variety of consumer products using an auction-basedformat. We operate a Mobile segment through our wholly-owned subsidiary VirginMobile Limited, which consists of our mobile telephony business. Our segmentsoperate entirely in the U.K. and no one customer represents more than 5% of ouroverall revenue.

Segment operating income beforedepreciation, amortization and other charges, which we refer to as Segment OCF,is management’s measure of segment profit as permitted under SFAS 131, *Disclosures about Segments of an Enterprise and Related Information.*Our management, including our chief executive officer who is our chiefoperating decision maker, considers Segment OCF as an important indicator ofthe operational strength and performance of our segments. Segment OCF excludesthe impact of costs and expenses that do not directly affect our cash flows.Other charges, including restructuring charges, are also excluded from SegmentOCF as management believes they are not characteristic of our underlyingbusiness operations. The business segments disclosed in the consolidatedfinancial statements are based on this organizational structure and informationreviewed by our management to evaluate the business segment results.

Segmentinformation for the three month periods ended March 31, 2007 and 2006 is asfollows (in millions):

| ** **                                    | ** ** | **Three months ended March 31, 2007** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                    | ** ** | **Cable**                                                      | ** ** | **Content** | ** ** | **Mobile** | ** ** | **Elims.** | ** ** | **Total** | ** ** |
| Revenue                                       |       | £                                                         | 800.3      |   |   | £ | 80.6 |   |   | £ | 141.0 |   |   | £ | — |   |   | £ | 1,021.9 |   |
| Inter  segment revenue                        |       | 0.9                                                            |       |   | 5.9 |   |   | — |   |   | (6.8 | ) |   | — |   |
| Operating  costs                              |       | (311.7                                                         | )          |   | (60.1 | ) |   | (83.4 | ) |   | 5.9 |   |   | (449.3 | ) |
| Selling,  general and administrative expenses |       | (222.7                                                         | )          |   | (14.2 | ) |   | (30.9 | ) |   | 0.9 |   |   | (266.9 | ) |
| Segment  OCF                                  |       | 266.8                                                          |       |   | 12.2 |   |   | 26.7 |   |   | — |   |   | 305.7 |   |
| Depreciation,  amortization and other charges |       | (295.5                                                         | )          |   | (4.1 | ) |   | (21.4 | ) |   | — |   |   | (321.0 | ) |
| Operating  (loss) income                      |       | £                                                         | (28.7      | ) |   | £ | 8.1 |   |   | £ | 5.3 |   |   | £ | — |   |   | £ | (15.3 | ) |

 

| ** **                                    | ** ** | **Three months ended March 31, 2006** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                    | ** ** | **Cable**                                                      | ** ** | **Content** | ** ** | **Mobile** | ** ** | **Elims.** | ** ** | **Total** | ** ** |
| Revenue                                       |       | £                                                         | 584.2      |   |   | £ | 27.2 |   |   |   | £ | — |   |   |   | £ | — |   |   | £ | 611.4 |   |
| Inter  segment revenue                        |       | 0.3                                                            |       |   | 1.8 |   |   |   | — |   |   |   | (2.1 | ) |   | — |   |
| Operating  costs                              |       | (237.6                                                         | )          |   | (19.1 | ) |   |   | — |   |   |   | 1.8 |   |   | (254.9 | ) |
| Selling,  general and administrative expenses |       | (151.5                                                         | )          |   | (6.9 | ) |   |   | — |   |   |   | 0.3 |   |   | (158.1 | ) |
| Segment  OCF                                  |       | 195.4                                                          |       |   | 3.0 |   |   |   | — |   |   |   | — |   |   | 198.4 |   |
| Depreciation,  amortization and other charges |       | (193.0                                                         | )          |   | (1.5 | ) |   |   | — |   |   |   | — |   |   | (194.5 | ) |
| Operating  income                             |       | £                                                         | 2.4        |   |   | £ | 1.5 |   |   |   | £ | — |   |   |   | £ | — |   |   | £ | 3.9 |   |

 

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

**Note 11—CondensedConsolidated Financial Information**

On April 13, 2004, our wholly-ownedsubsidiary, Virgin Media Finance PLC (formerly NTL Cable PLC), or Virgin MediaFinance, issued £375 million aggregate principal amount of 9.75% seniornotes due 2014, $425 million aggregate principal amount of 8.75% seniornotes due 2014, €225 millionaggregate principal amount of 8.75% senior notes due 2014 and $100 millionaggregate principal amount of floating rate notes due 2012, together referredto as the Senior Notes due 2014. On July 15, 2005, the $100 millionaggregate principal amount of floating rate notes was redeemed. On July 25,2006, Virgin Media Finance issued $550 million aggregate principal amount of9.125% senior notes due 2016, and together with the Senior Notes due 2014,these are referred to as the Senior Notes. We and certain of our subsidiaries,namely Virgin Media Group LLC (formerly NTL:Telewest LLC), Virgin MediaHoldings Inc. (formerly NTL Holdings Inc.), Virgin Media (UK) Group, Inc.(formerly NTL (UK) Group, Inc.) and Virgin Media Communications Limited(formerly NTL Communications Limited), have guaranteed the Senior Notes on asenior basis. Virgin Media Investment Holdings Limited, or VMIH, has guaranteedthe Senior Notes on a senior subordinated basis.

We present thefollowing condensed consolidated financial information as of March 31, 2007 andDecember 31, 2006 and for the three months ended March 31, 2007 and2006 as required by Article 3-10(d) of Regulation S-X.

| ** **                                                     | ** ** | **March 31, 2007** | ** **                                     |        |
|----------------------------------------------------------------|------------|------------------------------|------------------------------------------------|-------------|
| **Balance sheets**                                             | ** ** | ** **                   | ** **                                     | **Company** | ** ** | **Virgin  Media  Finance** | ** ** | **Other  guarantors** | ** ** | **VMIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                     | ** ** | **(in millions)**       | ** **                                     |
| Cash and cash equivalents                                      |       |                         | £       2.5 |        |   | £        — |   |   | £   24.8 |   |   | £      12.3 |   |   | £     325.5 |   |   |   | £          — |   |   | £     365.1 |   |
| Restricted cash                                                |       |                         | —                                         |        |   | — |   |   | — |   |   | — |   |   | 5.9 |   |   |   | — |   |   | 5.9 |   |
| Other current assets                                           |       |                         | —                                         |        |   | — |   |   | 1.2 |   |   | 0.1 |   |   | 616.6 |   |   |   | — |   |   | 617.9 |   |
| Total current assets                                           |       |                         | 2.5                                            |        |   | — |   |   | 26.0 |   |   | 12.4 |   |   | 948.0 |   |   |   | — |   |   | 988.9 |   |
| Fixed assets, net                                              |       |                         | 0.1                                            |        |   | — |   |   | — |   |   | — |   |   | 5,951.7 |   |   |   | — |   |   | 5,951.8 |   |
| Intangible assets, net                                         |       |                         | (3.0                                           | )           |   | — |   |   | (11.1 | ) |   | — |   |   | 3,565.4 |   |   |   | — |   |   | 3,551.3 |   |
| Investments in, and loans to, parent and  subsidiary companies |       |                         | 3,141.8                                        |        |   | 1,325.5 |   |   | 679.0 |   |   | 5,378.8 |   |   | (6,480.2 | ) |   |   | (3,671.4 | ) |   | 373.5 |   |
| Other assets, net                                              |       |                         | —                                         |        |   | — |   |   | — |   |   | 73.0 |   |   | 100.9 |   |   |   | — |   |   | 173.9 |   |
| Total assets                                                   |       |                         | £ 3,141.4                                 |        |   | £ 1,325.5 |   |   | £ 693.9 |   |   | £ 5,464.2 |   |   | £   4,085.8 |   |   |   | £ (3,671.4 | ) |   | £ 11,039.4 |   |
| Current liabilities                                            |       |                         | £       4.1 |        |   | £      38.7 |   |   | £   12.2 |   |   | £    324.3 |   |   | £   1,173.1 |   |   |   | £    (123.5 | ) |   | £   1,428.9 |   |
| Long term debt                                                 |       |                         | —                                         |        |   | 1,023.2 |   |   | — |   |   | 1,783.6 |   |   | 3,324.7 |   |   |   | — |   |   | 6,131.5 |   |
| Other long term liabilities                                    |       |                         | 0.3                                            |        |   | — |   |   | 0.5 |   |   | 114.3 |   |   | 226.9 |   |   |   | — |   |   | 342.0 |   |
| Shareholders’ equity                                      |       |                         | 3,137.0                                        |        |   | 263.6 |   |   | 681.2 |   |   | 3,242.0 |   |   | (638.9 | ) |   |   | (3,547.9 | ) |   | 3,137.0 |   |
| Total  liabilities and shareholders’ equity               |       |                         | £ 3,141.4                                 |        |   | £ 1,325.5 |   |   | £ 693.9 |   |   | £ 5,464.2 |   |   | £   4,085.8 |   |   |   | £ (3,671.4 | ) |   | £ 11,039.4 |   |
|                                                                |            |                              |                                                |             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                                     | ** ** | **December 31, 2006** | ** **                               |
|----------------------------------------------------------------|------------|---------------------------------|------------------------------------------|
| **Balance sheets**                                        | ** ** | ** **                      | ** **                               | **Company** | ** ** | **Virgin  Media  Finance** | ** ** | **Other  guarantors** | ** ** | **VMIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                     | ** ** | **(in millions)**          | ** **                               |
| Cash  and cash equivalents                                     |       |                            | £      2.4 |   |   | £       — |   |   | £  31.5 |   |   | £      0.2 |   |   | £     384.4 |   |   |   | £         — |   |   | £     418.5 |   |
| Restricted  cash                                               |       |                            | —                                   |   |   | — |   |   | — |   |   | — |   |   | 6.0 |   |   |   | — |   |   | 6.0 |   |
| Other  current assets                                          |       |                            | (1.7                                     | ) |   | — |   |   | 0.3 |   |   | 0.1 |   |   | 615.2 |   |   |   | — |   |   | 613.9 |   |
| Total  current assets                                          |       |                            | 0.7                                      |   |   | — |   |   | 31.8 |   |   | 0.3 |   |   | 1,005.6 |   |   |   | — |   |   | 1,038.4 |   |
| Fixed  assets, net                                             |       |                            | 0.7                                      |   |   | — |   |   | — |   |   | — |   |   | 6,025.6 |   |   |   | — |   |   | 6,026.3 |   |
| Intangible  assets, net                                        |       |                            | —                                   |   |   | — |   |   | (11.0 | ) |   | — |   |   | 3,648.0 |   |   |   | — |   |   | 3,637.0 |   |
| Investments  in, and loans to, parent and subsidiary companies |       |                            | 3,242.3                                  |   |   | 1,411.7 |   |   | 774.4 |   |   | 5,327.2 |   |   | (6,407.5 | ) |   |   | (3,976.6 | ) |   | 371.5 |   |
| Other  assets, net                                             |       |                            | —                                   |   |   | — |   |   | — |   |   | 103.2 |   |   | 67.1 |   |   |   | — |   |   | 170.3 |   |
| Total  assets                                                  |       |                            | £ 3,243.7                           |   |   | £ 1,411.7 |   |   | £ 795.2 |   |   | £ 5,430.7 |   |   | £  4,338.8 |   |   |   | £ (3,976.6 | ) |   | £ 11,243.5 |   |
| Current  liabilities                                           |       |                            | £     11.8      |   |   | £     30.1 |   |   | £    9.4 |   |   | £     97.6 |   |   | £  1,593.9 |   |   |   | £   (100.0 | ) |   | £  1,642.8 |   |
| Long  term debt                                                |       |                            | —                                   |   |   | 1,024.4 |   |   | — |   |   | 1,872.4 |   |   | 3,120.4 |   |   |   | — |   |   | 6,017.2 |   |
| Other  long term liabilities                                   |       |                            | 1.8                                      |   |   | — |   |   | 8.5 |   |   | 124.9 |   |   | 218.2 |   |   |   | — |   |   | 353.4 |   |
| Shareholders’  equity                                     |       |                            | 3,230.1                                  |   |   | 357.2 |   |   | 777.3 |   |   | 3,335.8 |   |   | (593.7 | ) |   |   | (3,876.6 | ) |   | 3,230.1 |   |
| Total  liabilities and shareholders’ equity               |       |                            | £ 3,243.7                           |   |   | £ 1,411.7 |   |   | £ 795.2 |   |   | £ 5,430.7 |   |   | £  4,338.8 |   |   |   | £ (3,976.6 | ) |   | £ 11,243.5 |   |
|                                                                |            |                                 |                                          |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                                               | ** ** | **Three months ended March 31, 2007** | ** **                            |        |
|--------------------------------------------------------------------------|------------|----------------------------------------------------------------|---------------------------------------|-------------|
| **Statements of operations**                                   | ** ** | ** **                                                     | ** **                            | **Company** | ** ** | **Virgin  Media  Finance** | ** ** | **Other  guarantors** | ** ** | **VMIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |   |
| ** **                                                               | ** ** | **(in millions)**                                         | ** **                            |        |
| Revenue                                                                  |       |                                                           | £     — |        |   |   | £     — |   |   |   | £     — |   |   | £     — |   |   | £ 1,021.9 |   |   |   | £    — |   |   | £ 1,021.9 |   |
| Operating costs                                                          |       |                                                           | —                                |        |   |   | — |   |   |   | — |   |   | — |   |   | (449.3 | ) |   |   | — |   |   | (449.3 | ) |
| Selling, general and administrative  expenses                            |       |                                                           | (1.9                                  | )           |   |   | — |   |   |   | (5.2 | ) |   | (0.3 | ) |   | (259.5 | ) |   |   | — |   |   | (266.9 | ) |
| Other charges                                                            |       |                                                           | (0.3                                  | )           |   |   | — |   |   |   | — |   |   | — |   |   | (11.3 | ) |   |   | — |   |   | (11.6 | ) |
| Depreciation and amortization                                            |       |                                                           | (0.1                                  | )           |   |   | — |   |   |   | — |   |   | — |   |   | (309.3 | ) |   |   | — |   |   | (309.4 | ) |
| Operating loss                                                           |       |                                                           | (2.3                                  | )           |   |   | — |   |   |   | (5.2 | ) |   | (0.3 | ) |   | (7.5 | ) |   |   | — |   |   | (15.3 | ) |
| Interest income and other, net                                           |       |                                                           | 0.2                                   |        |   |   | 25.3 |   |   |   | 11.4 |   |   | 17.2 |   |   | (10.4 | ) |   |   | (36.7 | ) |   | 7.0 |   |
| Interest expense                                                         |       |                                                           | —                                |        |   |   | (25.1 | ) |   |   | (6.4 | ) |   | (87.0 | ) |   | (36.7 | ) |   |   | 36.7 |   |   | (118.5 | ) |
| Share of income from equity investments                                  |       |                                                           | —                                |        |   |   | — |   |   |   | — |   |   | — |   |   | 7.2 |   |   |   | — |   |   | 7.2 |   |
| Losses on derivative instruments                                         |       |                                                           | —                                |        |   |   | — |   |   |   | — |   |   | — |   |   | (0.5 | ) |   |   | — |   |   | (0.5 | ) |
| Foreign currency gains (losses)                                          |       |                                                           | —                                |        |   |   | — |   |   |   | 0.1 |   |   | (0.1 | ) |   | 3.3 |   |   |   | — |   |   | 3.3 |   |
| Income tax expense                                                       |       |                                                           | (0.1                                  | )           |   |   | (0.1 | ) |   |   | (2.6 | ) |   | — |   |   | (0.7 | ) |   |   | — |   |   | (3.5 | ) |
| (Loss) income before equity in net  (loss) income from subsidiaries |       |                                                           | (2.2                                  | )           |   |   | (0.1 | ) |   |   | (2.7 | ) |   | (70.2 | ) |   | (45.3 | ) |   |   | — |   |   | (120.3 | ) |
| Equity in net (loss) income of subsidiaries                              |       |                                                           | (118.1                                | )           |   |   | (115.9 | ) |   |   | (115.4 | ) |   | (45.7 | ) |   | — |   |   |   | 395.1 |   |   | — |   |
| Net  loss                                                                |       |                                                           | £ (120.3                         | )           |   |   | £ (115.8 | ) |   |   | £ (118.1 | ) |   | £ (115.9 | ) |   | £   (45.3 | ) |   |   | £ 395.1 |   |   | £ (120.3 | ) |
|                                                                          |            |                                                                |                                       |             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

17

----

**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

| ** **                                                          | ** ** | **Three months ended March 31, 2006** | ** **                            |
|---------------------------------------------------------------------|------------|----------------------------------------------------------------|---------------------------------------|
| **Statements of operations**                              | ** ** | ** **                                                     | ** **                            | **Company** | ** ** | **Virgin  Media  Finance** | ** ** | **Other  guarantors** | ** ** | **VMIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                          | ** ** | **(in millions)**                                         | ** **                            |
| Revenue                                                             |       |                                                           | £     — |   |   |   | £    — |   |   |   | £     — |   |   |   | £    — |   |   |   | £ 611.4 |   |   |   | £    — |   |   | £ 611.4 |   |
| Operating costs                                                     |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (254.9 | ) |   |   | — |   |   | (254.9 | ) |
| Selling, general and administrative  expenses                       |       |                                                           | (3.1                                  | ) |   |   | — |   |   |   | (2.5 | ) |   |   | — |   |   |   | (152.5 | ) |   |   | — |   |   | (158.1 | ) |
| Other charges                                                       |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (8.4 | ) |   |   | — |   |   | (8.4 | ) |
| Depreciation and amortization                                       |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (186.1 | ) |   |   | — |   |   | (186.1 | ) |
| Operating (loss) income                                             |       |                                                           | (3.1                                  | ) |   |   | — |   |   |   | (2.5 | ) |   |   | — |   |   |   | 9.5 |   |   |   | — |   |   | 3.9 |   |
| Interest income and other, net                                      |       |                                                           | —                                |   |   |   | 19.5 |   |   |   | 8.0 |   |   |   | 64.7 |   |   |   | 8.1 |   |   |   | (91.7 | ) |   | 8.6 |   |
| Interest expense                                                    |       |                                                           | —                                |   |   |   | (19.2 | ) |   |   | (22.1 | ) |   |   | (53.2 | ) |   |   | (81.0 | ) |   |   | 91.7 |   |   | (83.8 | ) |
| Loss on extinguishment of debt                                      |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (32.4 | ) |   |   | — |   |   | (32.4 | ) |
| Share of income from equity  investments                            |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 1.4 |   |   |   | — |   |   | 1.4 |   |
| Losses on derivative instruments                                    |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | (9.2 | ) |   |   | — |   |   |   | — |   |   | (9.2 | ) |
| Foreign currency (losses) gains                                     |       |                                                           | —                                |   |   |   | — |   |   |   | (16.8 | ) |   |   | 4.6 |   |   |   | 2.2 |   |   |   | — |   |   | (10.0 | ) |
| Minority interest income                                            |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 0.4 |   |   |   | — |   |   | 0.4 |   |
| (Loss) income before equity in net (loss)  income from subsidiaries |       |                                                           | (3.1                                  | ) |   |   | 0.3 |   |   |   | (33.4 | ) |   |   | 6.9 |   |   |   | (91.8 | ) |   |   | — |   |   | (121.1 | ) |
| Cumulative effect of change in  accounting principle           |       |                                                           | —                                |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 1.2 |   |   |   | — |   |   | 1.2 |   |
| Equity in net (loss) income of  subsidiaries                        |       |                                                           | (116.8                                | ) |   |   | (81.5 | ) |   |   | (160.3 | ) |   |   | (88.4 | ) |   |   | — |   |   |   | 447.0 |   |   | — |   |
| Net  loss                                                           |       |                                                           | £ (119.9                         | ) |   |   | £ (81.2 | ) |   |   | £ (193.7 | ) |   |   | £ (81.5 | ) |   |   | £ (90.6 | ) |   |   | £ 447.0 |   |   | £ (119.9 | ) |
|                                                                     |            |                                                                |                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                                     | ** ** | **Three months ended March 31, 2007** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| **Statements of cash flows**                    | ** ** | ** **                                                     | ** ** | **Company** | ** ** | **Virgin   Media  Finance** | ** ** | **Other  guarantors** | ** ** | **VMIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                     | ** ** | **(in millions)**                                         | ** ** |
| Net cash provided by (used in) operating  activities           |       |                                                           | £ 3.0 |   |   |   | £ — |   |   |   | £ (5.7 | ) |   |   | £ (17.6 | ) |   |   | £ 126.3 |   |   |   | £ — |   |   | £ 106.0 |   |
| Investing  activities:                                         |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase of fixed and intangible assets                        |       |                                                           | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (152.6 | ) |   |   | — |   |   | (152.6 | ) |
| Acquisitions, net of cash acquired                             |       |                                                           | —     |   |   |   | — |   |   |   | — |   |   |   | (1.0 | ) |   |   | — |   |   |   | — |   |   | (1.0 | ) |
| Investments in, and loans to, parent and  subsidiary companies |       |                                                           | —     |   |   |   | — |   |   |   | — |   |   |   | 30.8 |   |   |   | (25.7 | ) |   |   | — |   |   | 5.1 |   |
| Other                                                          |       |                                                           | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 0.6 |   |   |   | — |   |   | 0.6 |   |
| Net cash used in investing activities                          |       |                                                           | —     |   |   |   | — |   |   |   | — |   |   |   | 29.8 |   |   |   | (177.7 | ) |   |   | — |   |   | (147.9 | ) |
| Financing  activities:                                         |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| New borrowings, net of financing fees                          |       |                                                           | —     |   |   |   | — |   |   |   | — |   |   |   | (0.1 | ) |   |   | — |   |   |   | — |   |   | (0.1 | ) |
| Principal payments on long term debt  and capital leases  |       |                                                           | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (7.5 | ) |   |   | — |   |   | (7.5 | ) |
| Other                                                          |       |                                                           | (2.9       | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   | (2.9 | ) |
| Net cash used in financing activities                          |       |                                                           | (2.9       | ) |   |   | — |   |   |   | — |   |   |   | (0.1 | ) |   |   | (7.5 | ) |   |   | — |   |   | (10.5 | ) |
| Effect of exchange rate changes                                |       |                                                           | —     |   |   |   | — |   |   |   | (1.0 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   | (1.0 | ) |
| Increase (decrease) in cash and cash  equivalents              |       |                                                           | 0.1        |   |   |   | — |   |   |   | (6.7 | ) |   |   | 12.1 |   |   |   | (58.9 | ) |   |   | — |   |   | (53.4 | ) |
| Cash and cash equivalents at beginning of  period              |       |                                                           | 2.4        |   |   |   | — |   |   |   | 31.5 |   |   |   | 0.2 |   |   |   | 384.4 |   |   |   | — |   |   | 418.5 |   |
| Cash  and cash equivalents at end of  period                   |       |                                                           | £ 2.5 |   |   |   | £ — |   |   |   | £ 24.8 |   |   |   | £ 12.3 |   |   |   | £ 325.5 |   |   |   | £ — |   |   | £ 365.1 |   |
|                                                                |            |                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

18

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**VIRGIN MEDIA INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

 

| ** **                                                     | ** ** | **Three months ended March 31, 2006** | ** **  |
|----------------------------------------------------------------|------------|----------------------------------------------------------------|-------------|
| **Statements of cash flows**                    | ** ** | ** **                                                     | ** **  | **Company** | ** ** | **Virgin   Media  Finance** | ** ** | **Other  guarantors** | ** ** | **VMIH** | ** ** | **All other  subsidiaries** | ** ** | **Adjustments** | ** ** | **Total** | ** ** |
| ** **                                                     | ** ** | **(in millions)**                                         | ** **  |
| Net  cash (used in) provided by operating activities           |       |                                                           | £ (1.9 | ) |   |   | £   0.4 |   |   |   | £     86.8 |   |   | £    (23.7 | ) |   | £    145.7 |   |   |   | £        — |   |   | £    207.3 |   |
| Investing  activities:                                         |       |                                                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase  of fixed assets                                      |       |                                                           | —      |   |   |   | — |   |   |   | — |   |   | — |   |   | (135.3 | ) |   |   | — |   |   | (135.3 | ) |
| Acquisitions,  net of cash acquired                            |       |                                                           | —      |   |   |   | — |   |   |   | (2,281.5 | ) |   | — |   |   | 282.3 |   |   |   | — |   |   | (1,999.2 | ) |
| Investments  in, and loans to, parent and subsidiary companies |       |                                                           | —      |   |   |   | (0.4 | ) |   |   | 11.6 |   |   | 1,210.4 |   |   | (1,216.7 | ) |   |   | — |   |   | 4.9 |   |
| Proceeds  from sale of assets                                  |       |                                                           | —      |   |   |   | — |   |   |   | — |   |   | — |   |   | 0.7 |   |   |   | — |   |   | 0.7 |   |
| Decrease  in restricted cash                                   |       |                                                           | —      |   |   |   | — |   |   |   | — |   |   | — |   |   | 4.2 |   |   |   | — |   |   | 4.2 |   |
| Net  cash provided by (used in) investing activities      |       |                                                           | —      |   |   |   | (0.4 | ) |   |   | (2,269.9 | ) |   | 1,210.4 |   |   | (1,064.8 | ) |   |   | — |   |   | (2,124.7 | ) |
| Financing  activities:                                         |       |                                                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds  from exercise of stock options                       |       |                                                           | 27.2        |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | — |   |   | 27.2 |   |
| Proceeds  from new borrowings, net of financing fees           |       |                                                           | —      |   |   |   | — |   |   |   | 1,775.1 |   |   | 258.4 |   |   | 2,886.5 |   |   |   | — |   |   | 4,920.0 |   |
| Principal  payments on long term debt and capital leases       |       |                                                           | —      |   |   |   | — |   |   |   | — |   |   | (1,445.1 | ) |   | (1,796.2 | ) |   |   | — |   |   | (3,241.3 | ) |
| Net  cash provided by (used in) financing activities      |       |                                                           | 27.2        |   |   |   | — |   |   |   | 1,775.1 |   |   | (1,186.7 | ) |   | 1,090.3 |   |   |   | — |   |   | 1,705.9 |   |
| Effect  of exchange rate changes                               |       |                                                           | (0.5        | ) |   |   | — |   |   |   | (8.0 | ) |   | — |   |   | 3.1 |   |   |   | — |   |   | (5.4 | ) |
| Increase  (decrease) in cash and cash equivalents              |       |                                                           | 24.8        |   |   |   | — |   |   |   | (416.0 | ) |   | — |   |   | 174.3 |   |   |   | — |   |   | (216.9 | ) |
| Cash  and cash equivalents at beginning of period              |       |                                                           | 0.1         |   |   |   | — |   |   |   | 446.6 |   |   | 5.4 |   |   | 283.1 |   |   |   | — |   |   | 735.2 |   |
| Cash  and cash equivalents at end of period                    |       |                                                           | £ 24.9 |   |   |   | £    — |   |   |   | £     30.6 |   |   | £       5.4 |   |   | £    457.4 |   |   |   | £        — |   |   | £    518.3 |   |
|                                                                |            |                                                                |             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

19

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITEDCONDENSED CONSOLIDATED BALANCE SHEETS (in millions)**

| ** **                                                                                                        | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                        | ** ** | **(Unaudited)**          | ** ** | **(See Note)**         | ** ** |
| **Assets**                                                                                                        |       |                     |       |                        |       |   |   |   |   |
| Current assets                                                                                                    |       |                     |       |                        |       |   |   |   |   |
| Cash and cash equivalents                                                                                         |       |                     | £     | 337.0                       |       |   |   | £ | 384.0 |   |   |
| Restricted cash                                                                                                   |       |                     | 5.2        |                        |       |   | 5.2 |   |   |
| Accounts receivable—trade, less allowances for  doubtful accounts of £32.1 (2007) and £49.4 (2006) |       |                     | 435.1      |                        |       |   | 454.9 |   |   |
| Inventory                                                                                                         |       |                     | 88.6       |                        |       |   | 65.3 |   |   |
| Prepaid expenses and other current assets                                                                         |       |                     | 87.5       |                        |       |   | 89.2 |   |   |
| Total current assets                                                                                              |       |                     | 953.4      |                        |       |   | 998.6 |   |   |
| Fixed  assets, net                                                                                                |       |                     | 5,793.1    |                        |       |   | 5,863.9 |   |   |
| Goodwill  and other indefinite-lived intangible assets                                                            |       |                     | 2,514.3    |                        |       |   | 2,521.4 |   |   |
| Intangible  assets, net                                                                                           |       |                     | 1,036.7    |                        |       |   | 1,110.3 |   |   |
| Equity  investments                                                                                               |       |                     | 373.5      |                        |       |   | 371.5 |   |   |
| Other  assets, net of accumulated amortization of £27.7 (2007) and £21.8 (2006)                         |       |                     | 174.0      |                        |       |   | 170.3 |   |   |
| Due  from parent and subsidiary companies                                                                         |       |                     | 658.1      |                        |       |   | 650.3 |   |   |
| **Total  assets**                                                                                                 |       |                     | £     | 11,503.1                    |       |   |   | £ | 11,686.3 |   |   |
| **Liabilities  and shareholders’ equity**                                                                    |       |                     |       |                        |       |   |   |   |   |
| Current  liabilities                                                                                              |       |                     |       |                        |       |   |   |   |   |
| Accounts payable                                                                                                  |       |                     | £     | 380.8                       |       |   |   | £ | 379.5 |   |   |
| Accrued expenses and other current liabilities                                                                    |       |                     | 420.6      |                        |       |   | 474.8 |   |   |
| VAT and employee taxes payable                                                                                    |       |                     | 83.5       |                        |       |   | 86.2 |   |   |
| Restructuring liabilities                                                                                         |       |                     | 116.4      |                        |       |   | 124.5 |   |   |
| Interest payable                                                                                                  |       |                     | 178.9      |                        |       |   | 196.5 |   |   |
| Deferred revenue                                                                                                  |       |                     | 252.6      |                        |       |   | 258.0 |   |   |
| Current portion of long-term debt                                                                                 |       |                     | 27.8       |                        |       |   | 141.9 |   |   |
| Total current liabilities                                                                                         |       |                     | 1,460.6    |                        |       |   | 1,661.4 |   |   |
| Long-term  debt, net of current portion                                                                           |       |                     | 6,460.5    |                        |       |   | 6,345.9 |   |   |
| Deferred  revenue and other long-term liabilities                                                                 |       |                     | 268.9      |                        |       |   | 266.2 |   |   |
| Deferred  income taxes                                                                                            |       |                     | 71.1       |                        |       |   | 77.0 |   |   |
| Total  liabilities                                                                                                |       |                     | 8,261.1    |                        |       |   | 8,350.5 |   |   |
| Commitments  and contingent liabilities                                                                           |       |                     |       |                        |       |   |   |   |   |
| Minority  interest                                                                                                |       |                     | —     |                        |       |   | — |   |   |
| Shareholders’ equity                                                                                         |       |                     |       |                        |       |   |   |   |   |
| Common stock                                                                                                      |       |                     | —     |                        |       |   | — |   |   |
| Additional paid-in capital                                                                                        |       |                     | 4,371.3    |                        |       |   | 4,371.3 |   |   |
| Accumulated other comprehensive income                                                                            |       |                     | (13.9      | )                           |       |   | (36.0 | ) |   |
| Accumulated deficit                                                                                               |       |                     | (1,115.4   | )                           |       |   | (999.5 | ) |   |
| Total shareholders’ equity                                                                                   |       |                     | 3,242.0    |                        |       |   | 3,335.8 |   |   |
| **Total liabilities and shareholders’  equity**                                                              |       |                     | £     | 11,503.1                    |       |   |   | £ | 11,686.3 |   |   |

----

Note: Thebalance sheet at December 31, 2006 has been derived from the auditedfinancial statements at that date.

See accompanying notes.

20

----

**VIRGIN MEDIAINVESTMENT HOLDINGS LIMITED**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited) (in millions, except per sharedata)**

| ** **                                                                                               | ** ** | **Three months ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| **Revenue**                                                                                              |       | £                                           | 991.4      |   | £ | 457.3 |   |
| **Costs and expenses**                                                                                   |       |                                             |       |   |   |
| Operating costs (exclusive of depreciation shown  separately below)                                      |       | 438.4                                            |       | 194.0 |   |
| Selling, general and administrative expenses                                                             |       | 250.2                                            |       | 114.1 |   |
| Other charges                                                                                            |       | 10.6                                             |       | 7.8 |   |
| Depreciation                                                                                             |       | 226.7                                            |       | 116.0 |   |
| Amortization                                                                                             |       | 75.4                                             |       | 24.8 |   |
|                                                                                                     |       | 1,001.3                                          |       | 456.7 |   |
| **Operating (loss) income**                                                                              |       | (9.9                                             | )          | 0.6 |   |
| **Other income (expense)**                                                                               |       |                                             |       |   |   |
| Interest income and other, net                                                                           |       | 6.6                                              |       | 3.2 |   |
| Interest expense                                                                                         |       | (121.8                                           | )          | (52.6 | ) |
| Share of income from equity investments                                                                  |       | 7.2                                              |       | — |   |
| Foreign currency transaction gains                                                                       |       | 3.2                                              |       | 7.3 |   |
| Loss on extinguishment of debt                                                                           |       | —                                           |       | (32.4 | ) |
| Losses on derivative instruments                                                                         |       | (0.5                                             | )          | (9.2 | ) |
| **Loss before income taxes, minority interest and cumulative effect of  change in accounting principle** |       | (115.2                                           | )          | (83.1 | ) |
| Income  tax expense                                                                                      |       | (0.7                                             | )          | — |   |
| Minority  interest                                                                                       |       | —                                           |       | 0.4 |   |
| Cumulative  effect of change in accounting principle                                                     |       | —                                           |       | 1.2 |   |
| **Net loss**                                                                                             |       | £                                           | (115.9     | ) | £ | (81.5 | ) |

 

See accompanying notes.

21

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**VIRGIN MEDIAINVESTMENT HOLDINGS LIMITED**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited) (in millions)**

| ** **                                                     | ** ** | **Three months ended  March 31,** | ** ** |
|----------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                     | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| **Net cash provided by operating activities**                  |       | £                                           | 86.9       |   | £ | 73.9 |   |
| **Investing activities**                                       |       |                                             |       |   |   |
| Purchase of fixed and intangible assets                        |       | (150.0                                           | )          | (118.4 | ) |
| Investments in, and loans to, parent and subsidiary  companies |       | 24.7                                             |       | 1,207.8 |   |
| Other                                                          |       | (1.0                                             | )          | 2.1 |   |
| Net cash (used in) provided by investing activities            |       | (126.3                                           | )          | 1,091.5 |   |
| **Financing activities**                                       |       |                                             |       |   |   |
| New borrowings, net of financing fees                          |       | (0.1                                             | )          | 258.4 |   |
| Principal payments on long-term debt and  capital leases       |       | (7.5                                             | )          | (1,462.5 | ) |
| Net cash used in financing activities                          |       | (7.6                                             | )          | (1,204.1 | ) |
| Decrease  in cash and cash equivalents                         |       | (47.0                                            | )          | (38.7 | ) |
| Cash  and cash equivalents, beginning of period                |       | 384.0                                            |       | 288.1 |   |
| Cash and cash  equivalents, end of period                      |       | £                                           | 337.0      |   | £ | 249.4 |   |

 

See accompanying notes.

22

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

**Note 1—Basis of Presentation**

We are an indirect, wholly-owned subsidiaryof Virgin Media Inc. (“Virgin Media”).

The accompanying unaudited condensedconsolidated financial statements have been prepared in accordance with U.S.generally accepted accounting principles for interim financial information andwith the rules and regulations of the Securities and Exchange Commission.Accordingly, they do not include all of the information and notes required byU.S. generally accepted accounting principles for complete financialstatements. In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded. Operating results for the three months ended March 31, 2007 arenot necessarily indicative of the results that may be expected for the yearending December 31, 2007. For further information, refer to theconsolidated financial statements and notes thereto included in the AnnualReport on Form 10-K for Virgin Media Inc. for the year ended December 31,2006.

On March 3, 2006, Virgin MediaHoldings Inc, or Virgin Media Holdings (then known as NTL Incorporated), mergedwith a subsidiary of Virgin Media Inc., or Virgin Media (then known as TelewestGlobal, Inc., or Telewest). The merger has been accounted for as a reverseacquisition in which Virgin Media Holdings is treated as the accountingacquirer, primarily because Virgin Media Holdings’ shareholders owned 75% ofthe common stock upon completion of the merger. Following the merger, Telewestchanged its name to NTL Incorporated, and subsequently to Virgin Media Inc. Asa result, the historical financial statements of Virgin Media Holdings becamethe historical financial statements of Virgin Media Inc. as of the completionof the merger. Therefore, the results of operations and cash flows forTelewest, the acquired company for accounting purposes, are included in theconsolidated financial statements from March 3, 2006, the date on whichthe merger was completed. The results of operations and cashflows for VirginMobile (as defined below) are included in the consolidated financial statementsfrom July 4, 2006, the date of its acquisition.

Certain prioryear balances have been reclassified to conform to the current periodpresentation.

**Note 2—Acquisitions**

*Acquisitionof Virgin Mobile*

On July 4, 2006, we acquired 100% ofthe outstanding shares and options of Virgin Mobile Holdings (UK) plc (“VirginMobile”) through a U.K. Scheme of Arrangement. Virgin Mobile is the largestmobile virtual network operator in the United Kingdom, with approximately 4.5million customers.

The totalpurchase price of £953.2 million included cash of £419.2 million,common stock valued at £518.8 million and estimated direct transactioncosts of £15.2 million. Virgin Media financed the cash portion of theoffer and transactional expenses through £475 million of additional borrowingsunder its senior credit facility and cash on hand.

*ReverseAcquisition of Telewest*

On March 3, 2006, Virgin MediaHoldings Inc. (then known as NTL Incorporated) merged with a subsidiary of VirginMedia Inc. (then known as Telewest Global, Inc.) and the merger has beenaccounted for as a reverse acquisition of Telewest using the purchase method.This merger created one of the U.K.’s largest providers of residentialbroadband and the U.K.’s leading provider of “triple-play” services. In 

23

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

connection withthis transaction, Telewest changed its name to NTL Incorporated, and has sincechanged its name to Virgin Media Inc.

On June 19,2006, in connection with our integration with Telewest UK Limited, we engagedin a post acquisition restructuring of Telewest UK Limited and its subsidiariesin order to integrate their operations with our existing U.K. operations and toimplement permanent financing. This restructuring involved a series of stepsthat included internal contributions, distributions, mergers and acquisitionsas well as borrowings from external sources and contributions of the proceedsof the same to us, to effect our acquisition of the shares of Telewest UKLimited and its subsidiaries. The completion of this restructuring resulted inTelewest UK Limited and its subsidiaries becoming our wholly-owned subsidiary.We have accounted for the acquisition of Telewest UK Limited and itssubsidiaries by applying the principles of APB 16, *BusinessCombinations*, in respect to transactions between entities undercommon control. As a result, the assets acquired and liabilities assumed havebeen recognized at their historical cost and the results of operations andcashflows for Telewest UK Limited are included in our consolidated financialstatements from June 19, 2006, the date the restructuring was completed.

**Note 3—LongTerm Debt**

Long term debt consists of (in millions):

| ** **                                                                    | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| 8.75%  U.S. Dollar senior loan notes due 2014 due to Virgin Media Finance PLC |       |                     | £     | 215.9                       |       |   |   | £ | 217.0 |   |   |
| 9.75%  Sterling senior loan notes due 2014 due to Virgin Media Finance PLC    |       |                     | 375.0      |                        |       |   | 375.0 |   |   |
| 8.75%  Euro senior loan notes due 2014 due to Virgin Media Finance PLC        |       |                     | 152.9      |                        |       |   | 151.6 |   |   |
| 9.125%  U.S. Dollar senior notes due 2016 due to Virgin Media Finance PLC     |       |                     | 279.4      |                        |       |   | 280.8 |   |   |
| Floating  rate senior loan notes due 2012 due to Virgin Media Finance PLC     |       |                     | 50.8       |                        |       |   | 51.1 |   |   |
| Senior  credit facility                                                       |       |                     | 5,025.8    |                        |       |   | 5,024.6 |   |   |
| Other  loan notes due to affiliates                                           |       |                     | 278.2      |                        |       |   | 277.6 |   |   |
| Capital  leases                                                               |       |                     | 104.9      |                        |       |   | 104.4 |   |   |
| Other                                                                         |       |                     | 5.4        |                        |       |   | 5.7 |   |   |
|                                                                          |       |                     | 6,488.3    |                        |       |   | 6,487.8 |   |   |
| Less:  current portion                                                        |       |                     | (27.8      | )                           |       |   | (141.9 | ) |   |
|                                                                          |       |                     | £     | 6,460.5                     |       |   |   | £ | 6,345.9 |   |   |

 

The effective interest rate on the seniorcredit facility was 7.4% and 7.1% as at March 31, 2007 and December 31,2006, respectively.

On April 13,2007, we borrowed £890 million under our senior credit facility which will berepayable in 2012, and used £863 million of the net proceeds to repay someof our obligations under our senior credit facility that were originallyscheduled to be paid in 2007 through 2011.

24

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

**Note 4—Employee Benefit Plans**

The components of net periodic pension cost in the three months ended March 31,2007 and 2006 were as follows (in millions):

| ** **                      | ** ** | **Three months  ended  March 31,** | ** ** |
|---------------------------------|------------|----------------------------------------------|------------|
| ** **                      | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| Service costs                   |       | £                                       | 0.6        |   | £ | 0.7 |   |
| Interest  costs                 |       | 4.2                                          |       | 3.9 |   |
| Expected  return on plan assets |       | (4.8                                         | )          | (4.2 | ) |
| Settlements  and curtailments   |       | —                                       |       | 0.3 |   |
| Net periodic benefit costs      |       | £                                       | —     |   | £ | 0.7 |   |

 

*Employer Contributions*

We previouslydisclosed in our financial statements for the year ended December 31, 2006that we expected to contribute £9.3 million to our pension plans in 2007. In April 2007,we agreed with the trustees of one of our pension plans to a new fundingarrangement whereby we will be paying an additional £3.3 million per annumfor the next three years. Additionally, we are seeking to effect a mergerof our three other defined benefit plans. The merger of these plans is subjectto the approval of the trustees. As a condition of trustee approval, we haveagreed to make a specific one-time contribution of £4.5 million. For the threemonths ended March 31, 2007, we contributed £0.8 million to our pensionplans. Reflecting the changes referenced above, we anticipate contributingan additional £16.3 million to fund our pension plans in 2007 for a totalof £17.1 million.

**Note 5—Other Charges IncludingRestructuring Charges**

Other chargesof £10.6 million and £7.8 million for the three months ended March 31,2007 and 2006, respectively, relate mainly to lease exit and employeetermination costs as a result of our acquisition-related restructuringprograms.

The followingtables summarize our historical restructuring provisions and the restructuringprovisions resulting from the acquisitions during 2006 (in millions):

| **Historical Restructuring Provisions** | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|-----------|------------|
| Balance, December 31, 2006                   |       |       | £     | —                                                          |       |                   | £     | 40.7      |       | £ | 40.7 |   |
| Charged to expense                                |       |       | —     |                                                            |       | 1.7                    |       | 1.7       |       |
| Utilized                                          |       |       | —     |                                                            |       | (4.1                   | )          | (4.1      | )          |
| Balance, March 31, 2007                      |       |       | £     | —                                                          |       |                   | £     | 38.3      |       | £ | 38.3 |   |

 

| **Acquisition Restructuring Provisions** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| Balance, December 31, 2006                    |       |       | £     | 20.4       |       |       | £     | 63.4       |       | £     | 83.8       |   |
| Charged to expense                                 |       |       | 2.8        |       |       | 6.1        |       | 8.9        |       |
| Utilized                                           |       |       | (11.4      | )          |       | (3.2       | )          | (14.6      | )          |
| Balance, March 31, 2007                       |       |       | £     | 11.8       |       |       | £     | 66.3       |       | £     | 78.1       |   |

 

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

**Note 6—Stockholders’Equity**

On June 19,2006, we issued shares to Virgin Media Finance PLC for cash consideration of£2.42 billion which was utilized to effect our acquisition of Telewest UKLimited and its subsidiaries.

*StockOption Plans*

We are an indirect, wholly-owned subsidiaryof Virgin Media. Accordingly, we have no stock-based compensation plans. As at March 31,2007, certain of our employees participated in the stock-based compensationplans of Virgin Media, as described in Virgin Media’s 2006 Annual Report on Form 10-K.

We have adoptedStatement of Financial Accounting Standards (SFAS) No. 123 (revised 2004),*Share-Based Payment*, effective January 1,2006. As a result, during the three months ended March 31, 2006, werecorded a cumulative effect of a change in accounting principle of £1.2million to reduce compensation expense recognized in previous periods.

**Note 7—ComprehensiveLoss**

Comprehensive loss comprises (in millions):

| ** **                                    | ** ** | **Three months  ended March 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Net  loss for period                          |       | £                                           | (115.9     | ) | £ | (81.5 | ) |
| Net  unrealized gains (losses) on derivatives |       | 22.1                                             |       | (0.8 | ) |
| Comprehensive  loss                           |       | £                                           | (93.8      | ) | £ | (82.3 | ) |

 

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

| ** **                                    | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Pension  liability adjustments                |       |                     | £     | (20.0                       | )          |   |   | £ | (20.0 | ) |   |
| Net  unrealized gains (losses) on derivatives |       |                     | 6.1        |                        |       |   | (16.0 | ) |   |
|                                          |       |                     | £     | (13.9                       | )          |   |   | £ | (36.0 | ) |   |

 

**Note 8—Incometaxes**

At each period end, it is necessary for usto make certain estimates and assumptions to compute the provision for incometaxes including, but not limited to, the expected operating income (or loss)for the year, projections of the proportion of income (or loss) earned andtaxed in the United Kingdom and the extent to which this income (or loss) mayalso be taxed in the United States, permanent and temporary differences, thelikelihood of deferred tax assets being recovered and the outcome of contingenttax risks. At each interim period, management uses the best informationavailable to develop these estimates and assumptions, which are used to computethe forecast effective tax rate for the full year which is applied in computingthe income tax expense or benefit for the interim period. In accordance with U.S.generally accepted accounting principles, the impact of revisions to theseestimates are recorded as income tax 

26

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

expense orbenefit in the period in which they become known. Accordingly, the accountingestimates used to compute the provision for income taxes have and will changeas new events occur, as more experience is acquired, as additional informationis obtained and our tax environment changes. To the extent that the estimatechanges during a subsequent quarter, the effect of the change on prior quartersas well as on the current quarter is included in income tax expense for thecurrent quarter.

For the three months ended March 31,2007, income tax expense was £0.7 million as compared with £nil for the sameperiod in 2006. The tax expense for the three months ended March 31, 2007 wascomprised of deferred federal tax expense of £2.0 million, and a U.K. taxbenefit of £1.3 million. The U.K. taxbenefit relates to amounts receivable in respect of the sale of U.K. tax lossesto an equity method investee.

In June 2006, the FASB issued FASBInterpretation (“FIN”) No. 48, *Accounting for Uncertaintyin Income Taxes—an interpretation of FASB Statement 109*. FIN 48prescribes a comprehensive model for recognizing, measuring, presenting anddisclosing in the financial statements tax positions taken or expected to betaken on a tax return, including a decision whether to file or not to file in aparticular jurisdiction. We adopted FIN 48 on January 1, 2007 and theadoption did not have a material effect on our consolidated financialstatements. Upon the adoption of FIN 48, we had £3.3 million ofunrecognized tax benefits. If subsequently recognized, the £3.3 millionwould reduce goodwill. We recognize interest and penalties related tounrecognized tax benefits in income tax expense on the statement of operations

The statute of limitations is open for theyears 2003 to 2006 in the U.S. and the U.K., our major tax jurisdictions. We donot expect that the amount of unrecognized tax benefits will significantlyincrease or decrease in the next twelve months.

The U.K. hasproposed changes in tax legislation that may impact our future U.K. taxposition. These changes include a reduction in the rate of taxation from 30% to28%, and a reduction in the rate at which capital allowances can be claimed ina year from 25% to 20%, with both changes coming into effect on April 1, 2008.Under FAS 109, *Accounting for Income Taxes*, theeffect of such changes on deferred tax balances are required to be recognizedin the period in which the new legislation is enacted. It is expected thelegislation will be enacted in the third quarter of 2007. Our deferred taxassets are fully covered by a valuation allowance, such that no impact isexpected to be recorded when it is enacted. There may be an impact in a futureperiod, to the extent a deferred tax benefit is recognized.

**Note 9—RelatedParty Transactions**

We are a wholly-owned subsidiary of Virgin Media. We charge VirginMedia and our other affiliates for operating costs and selling, general andadministrative expenses incurred by us on their behalf. The followinginformation summarizes our significant related party transactions with VirginMedia and its affiliates (in millions):

| ** **                                    | ** ** | **Three months ended  March 31,**         | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                    | ** ** | **    2007    ** | ** ** | **    2006    ** | ** ** |
| Revenue                                       |       |                                                     | £     | — |   |   |   | £ | 0.2 |   |   |
| Operating  costs                              |       |                                                     | 10.9       |   |   |   | 15.0 |   |   |
| Selling,  general and administrative expenses |       |                                                     | 9.6        |   |   |   | 9.0 |   |   |

 

27

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

The above recharges are recorded inoperating costs and selling, general and administrative expenses and offset therespective costs incurred.

Intercompany interest is charged from/to us by Virgin Media and itsaffiliates based on intercompany debt balances. Intercompany interest incomeand expense is calculated using a weighted average interest rate of externalborrowings by Virgin Media and its affiliates. The following informationsummarizes the amounts of intercompany interest charged from and to us byVirgin Media and its affiliates, which is included within interest income andexpense in our statements of operations (in millions):

| ** **        | ** ** | **Three months ended  March 31,**         | ** ** |
|-------------------|------------|----------------------------------------------------------|------------|
| ** **        | ** ** | **    2007    ** | ** ** | **    2006    ** | ** ** |
| Interest  income  |       |                                                     | £     | — |   |   |   | £ | 3.2 |   |   |
| Interest  expense |       |                                                     | 27.0       |   |   |   | 24.0 |   |   |

 

The amounts due to Virgin Media and its affiliates included in ourconsolidated balance sheets as of March 31, 2007 and 2006 were as follows (inmillions):

| ** **           | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|----------------------|------------|---------------|------------|------------------|------------|
| ** **           | ** ** | **2007**      | ** ** | **2006**         | ** ** |
| Due  from affiliates |       |          | £     | 658.1            |       |   |   | £ | 650.3 |   |   |
| Interest  payable    |       |          | 92.2       |             |       |   | 63.9 |   |   |
| Long term  debt      |       |          | 1,352.2    |             |       |   | 1,353.1 |   |   |

 

**Note 10—RecentAccounting Pronouncements**

In September 2006,the FASB issued SFAS No. 157, *Fair Value Measurements*.SFAS 157 provides guidance for using fair value to measure assets andliabilities. It also responds to investors’ requests for expanded informationabout the extent to which companies measure assets and liabilities at fairvalue, the information used to measure fair value, and the effect of fair valuemeasurements on earnings. SFAS 157 applies whenever other standardsrequire (or permit) assets or liabilities to be measured at fair value, anddoes not expand the use of fair value in any new circumstances. SFAS 157is effective for financial statements issued for fiscal years beginning after November 15,2007 and is required to be adopted by us in the first quarter of 2008. We arecurrently evaluating the effect that the adoption of SFAS 157 will have onour consolidated results of operations and financial condition and are not yetin a position to determine such effects.

**Note 11—IndustrySegments**

Our reportable segments Cable, Content andMobile are based on our method of internal reporting. Our primary businesssegment is our Cable segment, which consists of our television, broadband andfixed line telephone services sold on our cable network and, to a lesserextent, off our cable network. We operate a Content segment through ourwholly-owned subsidiaries Virgin Media Television Limited (“Virgin Media TV’’,formerly known as Flextech Limited) and sit-up Limited (“sit-up”), whichsupply television programming to the U.K. pay-television broadcasting marketincluding our televised shopping unit sit-up tv, which markets and retails awide variety of consumer products using an auction-based format. We operate aMobile segment through our wholly-owned subsidiary Virgin Mobile Limited, whichconsists of 

28

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**VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)**

our mobiletelephony business. Our segments operate entirely in the U.K. and no onecustomer represents more than 5% of our overall revenue.

Segment operating income before depreciation,amortization and other charges, which we refer to as Segment OCF, is management’smeasure of segment profit as permitted under SFAS 131, *Disclosuresabout Segments of an Enterprise and Related Information.* Ourmanagement, including our chief executive -officer who is our chief operatingdecision maker, considers Segment OCF as an important indicator of theoperational strength and performance of our segments. Segment OCF excludes theimpact of costs and expenses that do not directly affect our cash flows. Othercharges, including restructuring charges, are also excluded from Segment OCF asmanagement believes they are not characteristic of our underlying businessoperations. The business segments disclosed in the consolidated financialstatements are based on this organizational structure and information reviewedby our management to evaluate the business segment results.

In the three month period ended March 31, 2006, all of ouroperations were in the Cable segment. Segment information for the three monthperiod ended March 31, 2007 is as follows (in millions):

| ** **                                    | ** ** | **Three months ended March 31, 2007** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                    | ** ** | **Cable**                                                      | ** ** | **Content** | ** ** | **Mobile** | ** ** | **Elims.** | ** ** | **Total** | ** ** |
| Revenue                                       |       | £                                                         | 769.8      |   |   | £ | 80.6 |   |   | £ | 141.0 |   |   | £ | — |   |   | £ | 991.4 |   |
| Inter  segment revenue                        |       | 0.9                                                            |       |   | 5.9 |   |   | — |   |   | (6.8 | ) |   | — |   |
| Operating  costs                              |       | (300.8                                                         | )          |   | (60.1 | ) |   | (83.4 | ) |   | 5.9 |   |   | (438.4 | ) |
| Selling,  general and administrative expenses |       | (206.0                                                         | )          |   | (14.2 | ) |   | (30.9 | ) |   | 0.9 |   |   | (250.2 | ) |
| Segment  OCF                                  |       | 263.9                                                          |       |   | 12.2 |   |   | 26.7 |   |   | — |   |   | 302.8 |   |
| Depreciation,  amortization and other charges |       | (287.2                                                         | )          |   | (4.1 | ) |   | (21.4 | ) |   | — |   |   | (312.7 | ) |
| Operating  (loss) income                      |       | £                                                         | (23.3      | ) |   | £ | 8.1 |   |   | £ | 5.3 |   |   | £ | — |   |   | £ | (9.9 | ) |

 

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**ITEM 2.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

*The following discussion should be read inconjunction with the Condensed Consolidated Financial Statements and relatednotes that appear elsewhere in this document.*

**OVERVIEW**

We are a leading U.K. entertainment andcommunications business providing the first “quad-play” offering of television,broadband, fixed line telephone and mobile telephone services in the UnitedKingdom. We are one of the U.K.’s most popular residential broadband andpay-as-you-go mobile providers and the second largest provider in the U.K. ofpay television and fixed line telephone services.

Virgin Media Television, or Virgin Media TV, and ntl:Telewest Businessalso operate under the Virgin Media umbrella. Weprovide a broad range of programming through our eleven wholly-ownedchannels, such as LivingTV and Bravo; through UKTV, our joint ventures with BBCWorldwide; and through the portfolio of retail television channels operated bysit-up tv. ntl:Telewest Business provides a complete portfolio of voice, dataand internet solutions to leading businesses, public sector organizations andservice providers in the U.K.

Wepresently manage our business through three reportable segments:

·       **Cable**: our cable segment includes the distribution of televisionprogramming over our cable network and the provision of broadband and fixedline telephone services to consumers, businesses and public sectororganizations, both on our cable network and, to a lesser extent off ournetwork;

·       **Mobile**: our mobile segment includes the provision of mobile telephoneservices under the name Virgin Mobile to consumers over cellular networks ownedby T-Mobile; and

·       **Content**: our content segment includes the operations of our U.K. televisionchannels, such as LivingTV and Bravo and sit-up’s portfolio of retailtelevision channels. Although not included in our content segment revenue, ourcontent team also oversees our interest in the UKTV television channels,through our joint ventures with BBC Worldwide.

Our revenue by segment for the three months ended March 31, 2007and 2006 was as follows (in millions):

| ** **        | ** ** | **Three months ended March 31,** | ** ** |
|-------------------|------------|------------------------------------------------------|------------|
| ** **        | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| *Cable Segment*   |       |                                                 |       |   |   |   |   |   |   |
| Consumer          |       | £                                               | 637.3      |   | 62.4 | % | £ | 461.4 |   | 75.5 | % |
| Business          |       | 163.0                                                |       | 15.9 |   | 122.8 |   | 20.1 |   |
|              |       | 800.3                                                |       | 78.3 |   | 584.2 |   | 95.6 |   |
| *Mobile Segment*  |       | 141.0                                                |       | 13.8 |   | — |   | — |   |
| *Content Segment* |       | 80.6                                                 |       | 7.9 |   | 27.2 |   | 4.4 |   |
|              |       | £                                               | 1,021.9    |   | 100.0 | % | £ | 611.4 |   | 100.0 | % |

 

For furtherdiscussion of our business please refer to our Annual Report on Form 10-Kfor the year ended December 31, 2006 as filed with the SEC on March 1,2007.

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**Acquisitions**

***Acquisition of Virgin Mobile***

On July 4, 2006, we acquired 100% ofthe outstanding shares and options of Virgin Mobile Holdings (UK) plc (“VirginMobile”) through a U.K. Scheme of Arrangement. Virgin Mobile is the largestmobile virtual network operator in the United Kingdom, with approximately 4.5million customers.

The totalpurchase price of £953.2 million included cash of £419.2 million,common stock valued at £518.8 million and estimated direct transactioncosts of £15.2 million. We financed the cash portion of the offer andtransactional expenses through £475 million of additional borrowings under oursenior credit facility and cash on hand.

***Reverse Acquisition of Telewest***

On March 3, 2006, NTL merged with asubsidiary of Telewest and the merger has been accounted for as a reverseacquisition of Telewest using the purchase method. This merger created one of theU.K.’s largest providers of residential broadband and the U.K.’s leadingprovider of “triple-play” services. In connection with this transaction,Telewest changed its name to NTL Incorporated, and has since changed its nameto Virgin Media Inc.

The totalpurchase price of £3.5 billion included cash of £2.3 billion, commonstock valued at £1.1 billion, stock options with a fair value of£29.8 million and estimated direct transaction costs of£25.1 million.

**FactorsAffecting Our Business**

***Cable Segment***

Our Cable segment residential customersaccount for the majority of our total revenue. The number of residentialcustomers, the number and types of services that each customer uses and theprices we charge for these services drive our revenue. Our profit is driven bythe relative margins on the types of services we provide to these customers andby the number of services that we provide to them. For example, broadbandinternet is more profitable than our television services and, on average, our “quad-play”and “triple-play” customers are more profitable than “double-play” or “single-play”customers. Our packaging of services and our pricing are designed to encourageour customers to use multiple services such as television, telephone andbroadband at a lower price than each stand-alone product on a combined basis.Factors particularly affecting our profitability include customer churn,average revenue per user (ARPU), competition, the success of our integrationefforts, capital expenditures, currency movements and seasonality.

***CustomerChurn.******  ***Customer churnis a measure of the number of customers who stop using our services. Anincrease in our customer churn can lead to increased costs and reduced revenue.We continue to focus on improving our customer service and enhancing andexpanding our service offerings to existing customers in an effort to manageour customer churn rate. Our ability to reduce our customer churn rate beyond abase level is limited by factors like customers moving outside our networkservice area, in particular during the summer season. Managing our customerchurn rate is a significant component of our business plan. Our customer churnrate may increase if our customer service is seen as unsatisfactory, if we areunable to deliver our services over our network without interruption, or if wefail to match offerings by our competitors.

***CableARPU.******  ***Average RevenuePer User, or ARPU, is a measure we use to evaluate how effectively we arerealizing potential revenue from customers. We believe that our “triple-play”cable offering of television, broadband and fixed line telephone services isattractive to our existing customer base and 

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allows us toincrease our Cable ARPU by facilitating the sale of multiple services to eachcustomer. Cable ARPU excludes any recognition of revenue from our Mobilesegment. With the acquisition of Virgin Mobile we are now able to offer “quad-play”of television, broadband, mobile and fixed line telephone services, which webelieve will enhance our competitiveness and growth opportunities.

***Competition.******  ***Our ability to acquire and retain customers and increase revenuedepends on our competitive strength. There is significant competition in themarket for our consumer services, including broadband and telephone servicesoffered by British Telecom (“BT”) and resellers or local loop unbundlers,alternative internet access services like DSL, satellite television servicesoffered by British Sky Broadcasting Group plc (“BSkyB”), digital terrestrialtelevision offered through Freeview, internet protocol television offered byTiscali S.p.A. (“Tiscali”) and BT, and mobile telephone services offered byother mobile telephone operators. Our business services also face a range ofcompetitors, including BT and Cable & Wireless. Certain competitors,such as BT and BSkyB, are dominant in markets in which we compete and may usetheir dominance in those markets to offer bundled services that include two ormore of our product offerings. If competitive forces prevent us from chargingthe prices for these services that we plan to charge, or if our competition isable to attract our customers or potential customers we are targeting, ourresults of operations will be adversely affected.

***Integration.******  ***We are presently integrating our legacy NTL and Telewest cablebusinesses. This involves the incurrence of substantial operating and capitalexpenditures and, in some cases, involves the outsourcing of key functions inan effort to achieve synergies through the integration of the two businesses.For example, we are consolidating our billing platforms over the next twelvemonths. While these integration efforts are presently on track, any issues thatmay arise in connection with our integration could have a material negativeeffect on our financial performance.

***CapitalExpenditures.******  ***Our business requires substantial capital expenditures on acontinuing basis for various purposes, including expanding, maintaining andupgrading our network, investing in new customer acquisitions, and offering newservices. If we do not continue to invest in our network and in newtechnologies, our ability to retain and acquire customers may be hindered.Therefore, our liquidity and the availability of cash to fund capital projectsare important drivers of our revenue. When our liquidity is restricted, so isour ability to meet our capital expenditure requirements.

***Seasonality.****  *Somerevenue streams are subject to seasonal factors. For example, telephone usagerevenue by customers and businesses tends to be slightly lower during summerholiday months. Our customer churn rates include persons who disconnect theirservice because of moves, resulting in a seasonal increase in our churn ratesduring the summer months when higher levels of U.K. house moves occur andstudents leave their accommodations between academic years.

***Mobile Segment***

***Competition.******  ***Our ability to acquire and retain customers and increase revenuedepends on our competitive strength. There is significant competition in ourmarkets from mobile operators, including O2, Vodafone, Orange, T-Mobile and 3,and from other mobile virtual network operators, including Tesco Mobile, BTMobile and Carphone Warehouse. Many of our competitors are part of largemultinational groups, have substantial advertising and marketing budgets, andhave a significant retail presence. If competitive forces prevent us fromcharging the prices for these services that we plan to charge, or if ourcompetition is able to attract our customers or potential customers we aretargeting, our results of operations will be adversely affected.

***Seasonality.******  ***Some revenue streams and cost drivers are subject to seasonalfactors. For example, in the fourth quarter of each year our customeracquisition and retention costs typically increase due to the Christmas period.Our ARPU generally decreases in the first quarter of each year due to the fewernumber of days in February and lower usage after the Christmas period.

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***Distribution.***   We rely upon third parties to distribute our mobile productsand services. If any of these distribution partners were to cease to act asdistributors for our products and services, or the commissions or other costscharged by the third parties were to increase, our ability to gain newcustomers or retain existing customers may be adversely affected.

***Content Segment***

***Competition.******  ***Our television programming competes with other broadcasters foradvertising revenues, subscription revenues, and programming rights. sit-upcompetes with a large variety of retailers in the U.K. market and with othertelevision channels for audiences.

***LimitedNumber of Buyers.******  ***The principal third party buyer of our television channels is BSkyB.Other than BSkyB, there are no significant buyers of our television channels.

***Accessto Content.******  ***Most of the television content on the Virgin Media TV channels ispurchased from the U.S. and because there is a limited supply of contentavailable and an increasing number of digital channels in the U.K., VirginMedia TV may experience an increase in the cost of programming.

***Seasonality.******  ***Our Content segment incurs increased costs in the fourth quarter ofeach year due to the need to provide enhanced programming over the importantChristmas holiday period. Also, sit-up generally records increased revenues andcosts in the fourth quarter due to generally higher retail sales in the lead upto the Christmas holiday.

***General***

***Currency Movements.******  ***We encounter currency exchange rate risks because substantially allof our revenue and operating costs are earned and paid primarily in U.K. poundssterling, but we pay interest and principal obligations with respect to aportion of our existing indebtedness in U.S. dollars and euros. We haveimplemented a hedging program to seek to mitigate the risk from these exposures.The objective of this program is to reduce the volatility of our cash flows andearnings caused by changes in underlying rates.

**CriticalAccounting Policies**

The preparation of our consolidatedfinancial statements requires us to make estimates that affect the reportedamounts of assets, liabilities, revenues and expenses, and related disclosureof contingent assets and contingent liabilities. We base our judgments onhistorical experience and on various other assumptions that we believe arereasonable under the circumstances, the results of which form the basis formaking estimates about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions.

For adiscussion of the accounting judgments and estimates that we have identified ascritical in the preparation of our consolidated financial statements, pleaserefer to our Annual Report on Form 10-K for the year ended December 31,2006 as filed with the SEC on March 1, 2007.

**CONSOLIDATEDRESULTS OF OPERATIONS**

***Three Months Ended March 31, 2007 and2006***

*Revenue*

For the three months ended March 31,2007, revenue increased by 67.1% to £1,021.9 million from£611.4 million for the three months ended March 31, 2006. Thisincrease is primarily due to the reverse acquisition of Telewest and theinclusion of its revenues from March 3, 2006 and to the acquisition ofVirgin Mobile and the inclusion of its revenues from July 4, 2006.

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Cable ARPU hasincreased from £40.37 for the three months ended March 31, 2006 to £42.75for the three months ended March 31, 2007, reflecting the reverseacquisition of Telewest and the subsequent drive to encourage “triple-play”bundling and a focus on better quality customers. Our focus on acquiring newbundled customers and on cross-selling to existing customers is shown byRevenue Generating Units (RGUs) per customer increasing from 2.09 at March 31,2006 to 2.20 at March 31, 2007 and by the percentage of our customers with“triple-play” services growing from 34.9% at March 31, 2006 to 42.9% at March 31,2007.

*Operating costs*

For the threemonths ended March 31, 2007, operating costs, including network expenses,increased by 76.3% to £449.3 million from £254.9 million during the sameperiod in 2006. This increase is primarily attributable to the reverseacquisition of Telewest and to the acquisition of Virgin Mobile. Operatingcosts as a percentage of revenue increased to 44.0% for the three months ended March 31,2007, from 41.7% for the same period in 2006, due to the inclusion of theTelewest Content segment subsequent to the reverse acquisition of Telewest andthe new Mobile segment subsequent to the acquisition of Virgin Mobile, sincethese segments have lower margins than our Cable segment.

***Selling, general andadministrative expenses***

For the threemonths ended March 31, 2007, selling, general and administrative expensesincreased by 68.8% to £266.9 million from £158.1 million for the threemonths ended March 31, 2006. This increase is primarily attributable tothe reverse acquisition of Telewest and to the acquisition of Virgin Mobile.Selling, general and administrative expenses as a percentage of revenueremained broadly constant at 26.1% for the three months ended March 31,2007, compared to 25.9% for the same period in 2006. In the three months ended March 31,2007, we began the extensive marketing campaign behind our rebrand to VirginMedia which increased our marketing expenses significantly.

*Othercharges*

Other charges of £11.6 million for thethree months ended March 31, 2007 relate primarily to lease exit costs andemployee termination costs in connection with our restructuring programsinitiated in respect of the reverse acquisition of Telewest.

The followingtable summarizes our restructuring provisions (in millions):

| Historical Restructuring Provisions      | ** ** | ** ** | ** ** | **Involuntary  Employee  Termination  and Related  Costs** | ** ** | **Lease  Exit  Costs** | ** ** | **Total**  | ** ** |
|----------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------|------------|------------------------|------------|------------|------------|
| Balance, January 1, 2007                      |       |       | £     | —                                                          |       |                   | £     | 43.4       |       | £ | 43.4 |   |
| Charged to  expense                                |       |       | —     |                                                            |       | 1.8                    |       | 1.8        |       |
| Utilized                                           |       |       | —     |                                                            |       | (4.3                   | )          | (4.3       | )          |
| Balance,  March 31, 2007                      |       |       | £     | —                                                          |       |                   | £     | 40.9       |       | £ | 40.9 |   |
| **Acquisition Restructuring Provisions** | ** ** | ** ** | ** ** | ** **                                                      | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance, January 1, 2007                      |       |       | £     | 18.7                                                            |       |                   | £     | 64.7       |       | £ | 83.4 |   |
| Charged to  expense                                |       |       | 3.3        |                                                            |       | 6.5                    |       | 9.8        |       |
| Utilized                                           |       |       | (12.1      | )                                                               |       | (3.4                   | )          | (15.5      | )          |
| Balance, March 31, 2007                       |       |       | £     | 9.9                                                             |       |                   | £     | 67.8       |       | £ | 77.7 |   |
|                                                    |            |            |            |                                                                 |            |                        |            |            |            |  |  |  |  |  |  |

 

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*Depreciationexpense*

For the threemonths ended March 31, 2007, depreciation expense increased to £232.1million from £149.3 million for the three months ended March 31,2006. This increase is primarily attributable to the reverse acquisition ofTelewest and related fair value adjustment to the property and equipmentacquired, and to the acquisition of Virgin Mobile.

*Amortizationexpense*

For the three monthsended March 31, 2007, amortization expense increased to £77.3 millionfrom £36.8 million for the three months ended March 31, 2006. The increasein amortization expense relates to additional intangible assets arising fromthe reverse acquisition of Telewest and from the acquisition of Virgin Mobile.

*Interestincome and other*

For the threemonths ended March 31, 2007, interest income and other decreased to £7.0million from £8.6 million for the three months ended March 31, 2006,primarily as a result of lower cash and cash equivalents throughout the periodas compared to the same period in 2006.

*Interestexpense*

For the three months ended March 31,2007, interest expense increased to £118.5 million from £83.8 million forthe three months ended March 31, 2006, primarily as a result of theadditional borrowing as a result of the reverse acquisition of Telewest and theacquisition of Virgin Mobile.

We paid cashinterest of £155.0 million for the three months ended March 31, 2007,and £65.5 million for the three months ended March 31, 2006. Theincrease in cash interest payments resulted from the additional borrowings as aresult of the reverse acquisition of Telewest and the acquisition of VirginMobile, and changes in timing of interest payments.

*Loss onextinguishment of debt*

The loss onextinguishment of debt of £32.4 million in the three months ended March 31,2006 related to the write off of deferred financing costs on the senior creditfacility that was repaid upon completion of the refinancing for the reverseacquisition of Telewest. There was no loss on extinguishment of debt during thethree months ended March 31, 2007.

*Lossfrom derivative instruments*

The loss fromderivative instruments of £0.5 million in the three months ended March 31,2007 mainly relates to unfavorable movements in the fair value of sterlinginterest rate swaps. The loss from derivative instruments of £9.2 million inthe three months ended March 31, 2006 mainly related to the termination ofderivative instruments in respect of the foreign currency tranche of the seniorcredit facility that was repaid upon completion of the refinancing for thereverse acquisition of Telewest.

*Foreigncurrency gains ( losses)*

The foreigncurrency gains of £3.3 million in the three months ended March 31, 2007 waslargely comprised of gains resulting from favorable exchange rate movements,principally on dollar settlements. The foreign currency losses of £10.0 millionin the three months ended March 31, 2006 largely comprised foreignexchange losses of £30.1 million as a result of the termination of forward exchangecontracts partly offset by gains of £19.1 million on the repayment of the euroand U.S. dollar denominated tranches of the previous senior credit facility oncompletion of the refinancing for the reverse acquisition of Telewest.

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*Incometax expense*

For the threemonths ended March 31, 2007, income tax expense was £3.5 million ascompared with nil for the same period in 2006. The income tax expense forthe three months ended March 31, 2007 was comprised of current federaltaxes of £0.3 million, a U.S. state and local tax benefit of £0.6 million,deferred federal tax expense of £5.1 million and a U.K. tax benefit of £1.3million. The U.K. tax benefit relates toamounts receivable in respect of the sale of U.K. tax losses to anequity-method investee.

*Net loss*

For the threemonths ended March 31, 2007, net loss increased to £120.3 million comparedwith a loss of £119.9 million for the same period in 2006 due to thefactors discussed above.

*Net lossper share*

Basic anddiluted net loss per common share for the three months ended March 31,2007 was £0.37 compared to £0.51 for the three months ended March 31,2006. Basic and diluted net loss per share is computed using a weighted averageof 324.2 million shares issued in the three months ended March 31,2007 and a weighted average of 236.5 million shares issued for the same periodin 2006. Options and warrants to purchase shares along with shares of restrictedstock outstanding at March 31, 2007 are excluded from the calculation ofdiluted net loss per share, since the inclusion of such options, warrants andrestricted stock are anti-dilutive.

**SegmentInformation**

A description of the products and services,as well as year-to-date financial data, for each segment can be found in note10 to Virgin Media’s condensed consolidated financial statements. The segmentresults for the three months ended March 31, 2007 included in our condensedconsolidated financial statements are reported on an actual basis and includethe results of Telewest and Virgin Mobile.

The results of operations of each of ourCable and Content segments for the three months ended March 31, 2006 arereported in this section on a pro forma combined basis as if the reverseacquisition of Telewest had occurred at January 1, 2006 and combineTelewest’s historical Content and sit-up segments into the combinedcompany’s Content segment. The pro forma data has been calculated on a basisconsistent with the pro forma financial information filed with the Securitiesand Exchange Commission under our Form 8-K/A on May 10, 2006. Webelieve that a pro forma comparison of these segments is more relevant than ahistoric comparison as: (a) in respect of our Cable segment, the size ofthe acquired legacy Telewest cable business would obscure any meaningfuldiscussion of changes in our Cable segment if viewed on a historical basis; and(b) we did not have a Content segment prior to March 3, 2006.Comparative pro forma results of our Mobile segment have not been presented.

The reportable segments disclosed in this Form 10-Qare based on our management organizational structure as of March 31, 2007.Future changes to this organizational structure may result in changes to thereportable segments disclosed.

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

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***Cable Segment***

The summary combined results of operations of our Cable segment were asfollows (in millions):

| ** **                                    | ** ** | **Three months ended March 31** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | **   (Actual)   **    | ** ** | **   (Pro forma)   ** | ** ** |
| Revenue                                       |       |                                                | £     | 800.3 |   |   |   | £ | 802.3 |   |   |
| Inter  segment revenue                        |       |                                                | 0.9        |   |   |   | 0.5 |   |   |
| Segment  OCF                                  |       |                                                | 266.8      |   |   |   | 267.6 |   |   |
| Depreciation,  amortization and other charges |       |                                                | (295.5     | ) |   |   | (271.2 | ) |   |
| Operating  loss                               |       |                                                | £     | (28.7 | ) |   |   | £ | (3.6 | ) |   |

 

***Revenue***

Our Cable segment revenue by customer type for the three months ended March 31,2007 and 2006 was as follows (in millions) :

| ** **    | ** ** | **Three months ended  March 31,** | ** ** | **Increase/**        | ** ** |
|---------------|------------|--------------------------------------------------|------------|----------------------|------------|
| ** **    | ** ** | **2007**                                         | ** ** | **2006**             | ** ** | **(Decrease)** | ** ** |
| ** **    | ** ** | **(Actual)**                                     | ** ** | **(Pro forma)** | ** ** | ** ** | ** ** |
| Revenue:      |       |                                             |       |                 |       |   |   |   |   |   |   |   |   |
| Consumer      |       |                                             | £     | 637.3                |       |   |   | £ | 636.7 |   |   |   | 0.1 | % |   |
| Business      |       |                                             | 163.0      |                 |       |   | 165.6 |   |   |   | (1.6 | )% |   |
| Total revenue |       |                                             | £     | 800.3                |       |   |   | £ | 802.3 |   |   |   | (0.2 | )% |   |

* *

*Consumer:*   For the threemonths ended March 31, 2007, revenue from residential customers increasedby 0.1% to £637.3 million from pro forma revenue of £636.7 million for thethree months ended March 31, 2006. This increase is driven largely bygrowth in the number of broadband internet subscribers together with televisionand telephony price rises offset by lower telephony subscribers and lowertelephony usage. Cable ARPU has increased from £41.50 on a pro forma basis forthe three months ended March 31, 2006 to £42.75 for the three months endedMarch 31, 2007. This increase reflects our drive to encourage “triple-play”bundling and a focus on better quality customers.

*Business:*   For the three months ended March 31, 2007, revenue frombusiness customers decreased by 1.6% to £163.0 million from pro forma revenueof £165.6 million for the three months ended March 31, 2006. Thisdecrease is attributable to a decline in wholesale revenue, partially offset bygreater voice and other revenues.

*Cablesegment OCF*

For the threemonths ended March 31, 2007, Cable segment OCF decreased slightly to£266.8 million from pro forma Cable segment OCF of £267.6 million for the threemonths ended March 31, 2006. Savings made in operating costs and selling,general and administrative costs since the reverse acquisition of Telewest havebeen offset by higher marketing and advertising costs incurred in connectionwith the rebrand to Virgin Media and the impact of lower business wholesalerevenues in the three months ended March 31, 2007.

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*SummaryCable Statistics*

Selected statistics for our residential cable customers, excludingcustomers off our cable network and Virgin Mobile customers, for the threemonths ended March 31, 2007 as well as the four prior quarters, are set forthin the table below.

| ** **                                             | ** ** | **For the three months ended** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                             | ** ** | **March 31,  2007**                           | ** ** | **December 31,  2006** | ** ** | **September 30,  2006** | ** ** | **June 30,  2006** | ** ** | **March 31,  2006** | ** ** |
| Opening customers                                      |       | 4,854,500                                          |       |   | 4,891,500 |   |   |   | 4,928,700 |   |   | 4,983,800 |   | 3,089,800 |   |
| Data cleanse(1)                                        |       | —                                             |       |   | — |   |   |   | — |   |   | (36,200 | ) | — |   |
| Adjusted opening customers                             |       | 4,854,500                                          |       |   | 4,891,500 |   |   |   | 4,928,700 |   |   | 4,947,600 |   | 3,089,800 |   |
| Increase in customers on  acquisition of Telewest |       | —                                             |       |   | — |   |   |   | — |   |   | — |   | 1,880,400 |   |
| Customer additions                                     |       | 184,300                                            |       |   | 213,500 |   |   |   | 229,200 |   |   | 192,300 |   | 167,100 |   |
| Customer disconnects                                   |       | (231,200                                           | )          |   | (250,500 | ) |   |   | (266,500 | ) |   | (211,200 | ) | (153,500 | ) |
| Net customer movement                                  |       | (46,900                                            | )          |   | (37,000 | ) |   |   | (37,300 | ) |   | (18,900 | ) | 13,600 |   |
| Closing customers                                      |       | 4,807,600                                          |       |   | 4,854,500 |   |   |   | 4,891,500 |   |   | 4,928,700 |   | 4,983,800 |   |
| Churn(2)                                               |       | 1.6                                                | %          |   | 1.7 | % |   |   | 1.8 | % |   | 1.5 | % | 1.4 | % |
| Revenue  generating units(3)                           |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Television                                             |       | 3,390,000                                          |       |   | 3,353,900 |   |   |   | 3,315,400 |   |   | 3,293,100 |   | 3,315,900 |   |
| DTV (included in Television)                           |       | 3,081,100                                          |       |   | 3,005,900 |   |   |   | 2,922,000 |   |   | 2,836,200 |   | 2,786,500 |   |
| Telephone                                              |       | 4,050,600                                          |       |   | 4,114,000 |   |   |   | 4,178,300 |   |   | 4,233,000 |   | 4,268,100 |   |
| Broadband                                              |       | 3,146,400                                          |       |   | 3,058,500 |   |   |   | 2,980,400 |   |   | 2,902,300 |   | 2,821,700 |   |
| Total Revenue Generating Units                         |       | 10,587,000                                         |       |   | 10,526,400 |   |   |   | 10,474,100 |   |   | 10,428,400 |   | 10,405,700 |   |
| RGU/Customers                                          |       | 2.20x                                              |       |   | 2.17x |   |   |   | 2.14x |   |   | 2.12x |   | 2.09x |   |
| Triple-play penetration                                |       | 42.9                                               | %          |   | 40.6 | % |   |   | 38.7 | % |   | 37.1 | % | 34.9 | % |
| Cable average revenue per user(4)                      |       | £                                             | 42.75      |   |   | £ | 42.82 |   |   |   | £ | 42.48 |   |   | £ | 42.21 |   | £ | 40.37 |   |
| ARPU  calculation:                                     |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| On-net revenues (millions)                             |       | £                                             | 620.0      |   |   | £ | 626.7 |   |   |   | £ | 625.4 |   |   | £ | 628.4 |   | £ | 443.3 |   |
| Average  customers(5)                                  |       | 4,834,900                                          |       |   | 4,878,800 |   |   |   | 4,907,400 |   |   | 4,962,300 |   | 3,660,500 |   |

 

At March 31, 2007, we also provide services off our cable networkto 270,500 broadband and 65,100 telephone RGUs, as compared to 260,800 broadbandand 44,500 telephone RGUs at December 31, 2006.

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(1)             Data cleanseactivity in Q2-06 resulted in a decrease of 36,200 customers and 69,000RGUs, a decrease of approximately 13,500 Telephone, 24,400 Broadband and 31,100TV RGUs. Data cleanse activity in Q2-06 is a result of more closelyaligning customer definitions between NTL and Telewest together with theremoval of approximately 20,000 inactive backlog customers in NTL.

(2)             Customer churn iscalculated by taking the total disconnects during the month and dividing themby the average number of customers during the month. Average monthly churnduring a quarter is the average of the three monthly churn calculations withinthe quarter.

(3)             Each telephone,television and broadband internet subscriber directly connected to our networkcounts as one RGU. Accordingly, a subscriber who receives both telephone andtelevision service counts as two RGUs. RGUs may include subscribers receivingsome services for free or at a reduced rate in connection with incentiveoffers.

(4)             The monthly cableaverage revenue per user, or cable ARPU, is calculated on a quarterly basis bydividing total revenue generated from the provision of telephone, televisionand internet services to customers who are directly connected to our network inthat period, exclusive of VAT, by the average number of customers directlyconnected to our network in that period divided by three. Cable average revenueper user for the three months ended March 31, 2006, previously disclosedas £40.92, has, due to the discovery of a calculation error, been restated to£40.37.

(5)             For the threemonths ended March 31, 2006, average customers has been calculated byadding the average customers who were directly connected to the NTL network andthe pro rata proportion of customers directly connected to the Telewest networkfor the number of days subsequent to the acquisition of Telewest.

***Mobile Segment***

Virgin Mobile was acquired on July 4,2006, and its results of operations have been consolidated from that date.Total Mobile segment revenue for the three months ended March 31, 2007 was£141.0 million, of which £136.0 million was service revenue and £5.0 millionwas equipment revenue. Equipment revenue is stated net of discounts earnedthrough service usage.

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Mobile segment OCF was £26.7 million forthe three months ended March 31, 2007.

In the threemonths ended March 31, 2007, the number of customers fell by 61,300compared to net additions of 11,100 in the three months ended December 31,2006. Prepay customer losses of 115,500 were partially offset by net additionsof 54,200 contract customers in the three months ended March 31, 2007. Thegrowth in contract customers reflects the drive for “quad-play” packagesthrough cross-selling with our Cable segment products. The decline in prepaycustomers reflects increased competition in the market.

*Summary Mobile Statistics*

Selected statistics for Virgin Mobile since acquisition are set forthin the table below:

| ** **                                              | ** ** | **For the three months ended** | ** ** |
|---------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                              | ** ** | **March 31,**                                 | ** ** | **December 31,** | ** ** | **September 30,** | ** ** |
| ** **                                              | ** ** | **2007**                                           | ** ** | **2006** | ** ** | **2006** | ** ** |
| Opening  customers(1):                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| Prepay                                                  |       | 4,330,700                                          |       |   | 4,390,900 |   |   |   | — |   |   |
| Contract                                                |       | 192,100                                            |       |   | 120,800 |   |   |   | — |   |   |
|                                                    |       | 4,522,800                                          |       |   | 4,511,700 |   |   |   | — |   |   |
| Increase in customers on acquisition of Virgin  Mobile: |       |                                               |       |   |   |   |   |   |   |   |   |
| Prepay                                                  |       |                                               |       |   |   |   |   |   | 4,292,800 |   |   |
| Contract                                                |       |                                               |       |   |   |   |   |   | 96,200 |   |   |
|                                                    |       |                                               |       |   |   |   |   |   | 4,389,000 |   |   |
| Net customer additions:                                 |       |                                               |       |   |   |   |   |   |   |   |   |
| Prepay                                                  |       | (115,500                                           | )          |   | (60,200 | ) |   |   | 98,100 |   |   |
| Contract                                                |       | 54,200                                             |       |   | 71,300 |   |   |   | 24,600 |   |   |
|                                                    |       | (61,300                                            | )          |   | 11,100 |   |   |   | 122,700 |   |   |
| Closing customers:                                      |       |                                               |       |   |   |   |   |   |   |   |   |
| Prepay                                                  |       | 4,215,200                                          |       |   | 4,330,700 |   |   |   | 4,390,900 |   |   |
| Contract                                                |       | 246,300                                            |       |   | 192,100 |   |   |   | 120,800 |   |   |
|                                                    |       | 4,461,500                                          |       |   | 4,522,800 |   |   |   | 4,511,700 |   |   |
| Mobile average revenue per user(2)                      |       | £                                             | 10.07      |   |   | £ | 10.59 |   |   |   | £ | 10.28 |   |   |
| ARPU  calculation:                                      |       |                                               |       |   |   |   |   |   |   |   |   |
| Mobile  service revenue (millions)                      |       | £                                             | 136.0      |   |   | £ | 141.8 |   |   |   | £ | 132.5 |   |   |
| Average  customers                                      |       | 4,499,300                                          |       |   | 4,465,400 |   |   |   | 4,294,800 |   |   |

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(1)          Mobile customer information is for active customers. Prepay customersare defined as active customers if they have made an outbound event in thepreceding 90 days. Contract customers are defined as active customers if theyhave been provisioned and have not been disconnected.

(2)          Mobilemonthly average revenue per user, or Mobile ARPU, is calculated on servicerevenue for the periods since acquisition, divided by the average activecustomers for the periods since acquisition, divided by three.

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*Content Segment*

The summary combined results of operations of our Content segment wereas follows (in millions):

| ** **                                    | ** ** | **Three months  ended March 31** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                        | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | **(Actual)**                                    | ** ** | **(Pro forma)** | ** ** |
| Revenue                                       |       |                                            | £     | 80.6 |   |   |   | £ | 86.5 |   |   |
| Inter  segment revenue                        |       |                                            | 5.9        |   |   |   | 5.3 |   |   |
| Segment  OCF                                  |       |                                            | 12.2       |   |   |   | 9.4 |   |   |
| Depreciation,  amortization and other charges |       |                                            | (4.1       | ) |   |   | (6.7 | ) |   |
| Operating  income                             |       |                                            | £     | 8.1 |   |   |   | £ | 2.7 |   |   |

 

*Revenue*

For the threemonths ended March 31, 2007, revenue in the Content segment decreased by6.8% to £80.6 million from pro forma revenue of £86.5 million for the threemonths ended March 31, 2006. This decrease is driven by reducedsubscription revenue as a result of a new carriage contract with BSkyB.

*Contentsegment OCF*

For the threemonths ended March 31, 2007, Content segment OCF increased by 29.8% to£12.2 million from pro forma Content segment OCF of £9.4 million for thethree months ended March 31, 2006. The increase in Content pro formasegment OCF is primarily due to the settlement of a long-running legal claim,which resulted in the reversal of a historic accrual. The reversal generated anon-recurring increase in Content segment OCF. The increase was partiallyoffset by the reduction in subscription revenue from BSkyB referred to above.

**LIQUIDITYAND CAPITAL RESOURCES**

As ofMarch 31, 2007, we had £6,159.3 million of debt outstanding, compared to£6,159.1 million as of December 31, 2006, and £5,903.4 million as ofMarch 31, 2006, and £365.1 million of cash and cash equivalents, comparedto £418.5 million as of December 31, 2006 and £518.3 million as ofMarch 31, 2006. The increase in debt since March 31, 2006 isprimarily attributable to the acquisition of Virgin Mobile in July 2006.Our business is capital intensive, we are highly leveraged, and we havehistorically incurred operating losses and negative cash flow, partly as aresult of our construction costs, operating expenditures and interest costs.

We requiresignificant amounts of capital to connect customers to our network, expand andupgrade our network, offer new services and integrate our billing systems andcustomer databases.

We must alsoregularly service interest payments with cash flows from operations. Ourability to sustain operations, meet financial covenants under our indebtedness,and make required payments on our indebtedness could be impaired if we areunable to maintain or achieve various financial performance measures. Ourability to service our capital needs, to service our obligations under ourindebtedness and to fund our ongoing operations will depend upon our ability togenerate cash.

Although weexpect to generate positive cash flow in the future, we cannot be certain thatthis will be the case. We believe that our cash on hand, together with cashfrom operations and undrawn credit facility, will be sufficient for our cashrequirements through to at least March 31, 2008. However, our cashrequirements after March 31, 2008 may exceed these sources of cash. Thismay require that we obtain additional financing in excess of the financingincurred in the recent refinancing transaction. We may not be able to obtainfinancing at all, or on favorable terms, or we may be contractually preventedby the terms of our senior notes or our senior credit facility from incurringadditional indebtedness.

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We are a holding company with noindependent operations or significant assets other than our investments in oursubsidiaries. As a result, we will depend upon the receipt of sufficient fundsfrom our subsidiaries to meet our obligations. In addition, the terms of ourand our subsidiaries’ existing and future indebtedness and the laws of thejurisdictions under which those subsidiaries are organized limit the payment ofdividends, loan repayments and other distributions to us under manycircumstances.

Our debtagreements and the debt agreements of some of our subsidiaries containrestrictions on our ability to transfer cash between groups of oursubsidiaries. As a result of these restrictions, although our overall liquiditymay be sufficient to satisfy our obligations, we may be limited by covenants insome of our debt agreements from transferring cash to other subsidiaries thatmight require funds. In addition, cross default provisions in our otherindebtedness may be triggered if we default on any of these debt agreements.

**ConsolidatedStatement of Cash Flows**

***Three Months Ended March 31, 2007 and2006***

For the three months ended March 31,2007, cash provided by operating activities decreased to £106.0 million from£207.3 million for the three months ended March 31, 2006. Thisdecrease is primarily attributable to an increase in cash paid for interest.For the three months ended March 31, 2007, cash paid for interest,exclusive of amounts capitalized, increased to £155.0 million from£65.5 million during the same period in 2006. This increase resulted fromthe higher levels of borrowings and repayment of existing facilities followingthe reverse acquisition of Telewest and the acquisition of Virgin Mobile.

For the three months ended March 31,2007, cash used in investing activities was £147.9 million compared withcash used in investing activities of £2,124.7 million for the three monthsended March 31, 2006. The cash used in investing activities in the threemonths ended March 31, 2007 mainly represents purchases of fixed assets.The cash used in investing activities in the three months ended March 31,2006 includes £1,999.2 million for the reverse acquisition of Telewest, net ofcash acquired of £294.9 million. Purchases of fixed and intangible assetsincreased to £152.6 million for the three months ended March 31, 2007from £135.3 million for the same period in 2006 primarily because of thereverse acquisition of Telewest and the acquisition of Virgin Mobile.

Cash used infinancing activities for the three months ended March 31, 2007 was £10.5million compared to cash provided by financing activities of £1,705.9 millionfor the three months ended March 31, 2006. The principal sources of cashprovided by financing activities for the three months ended March 31, 2006were the new £3.2 billion senior credit facilities and the £1.8 billion bridgeloan offset by the repayment of our previous senior credit facilities. Cashused in financing activites for the three months ended March 31, 2007 wasprimarily used for principal payments on long-term debt and capital leases anddividend payments.

**Long-TermDebt**

*SeniorCredit Facility*

During 2006, we entered into a new seniorcredit facility in an aggregate principal sterling equivalent amount of £5,275million, comprising a £3,350 million 5 year amortizing Tranche A term loanfacility, a £175 million 5 year amortizing Tranche A1 term loan facility, a£300 million 61⁄2 year bullet Tranche B1 term loan facility, a £351 million 61⁄2year bullet Tranche B2 term loan facility, a €500 million 61⁄2 year bullet Tranche B3 term loan facility, a $650million 61⁄2 year bullet Tranche B4 term loan facility, a £300 million 7 yearbullet Tranche C term loan facility and a £100 million 5 year multi-currencyrevolving loan facility. The principal under Tranches A and A1 is subject toscheduled repayment every six months.

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In April 2007, we amended the seniorcredit facility and borrowed an additional £890 million under a 51⁄2 year bulletTranche B5 term loan facility and a 51⁄2 year Tranche B6 term loan facility. Weused the net proceeds to repay some of our obligations under the Tranche A andTranche A1 term loan facilities.

After giving effect to the refinancing in April 2007, theprincipal payments are scheduled as follows (in millions):

| **Date**                 | ** ** | ** ** | ** ** | **Amount** | ** ** |
|--------------------------|------------|------------|------------|------------|------------|
| March 31,  2009     |       | £     | 2.5        |       |
| September 30,  2009 |       | £     | 474.5      |       |
| March 31,  2010     |       | £     | 526.5      |       |
| September 30,  2010 |       | £     | 579.4      |       |
| March 3,  2011      |       | £     | 966.0      |       |
| September 3,  2012  |       | £     | 2,203.7    |       |
| March 3,  2013      |       | £     | 300.0      |       |

 

The senior credit facility (other than forTranche C) has the benefit of a full and unconditional senior secured guaranteefrom Virgin Media Finance PLC as well as first priority pledges of the sharesand assets of substantially all of the operating subsidiaries of Virgin MediaInvestment Holdings Limited (“VMIH”) and of receivables arising under anyintercompany loans to those subsidiaries. The senior secured guarantee ofVirgin Media Finance PLC is secured by a first priority pledge of the entirecapital stock of VMIH and the receivables under any intercompany loans fromVirgin Media Finance PLC to VMIH. The guarantee of the Tranche C of the seniorcredit facility will share in the security of Virgin Media Finance PLC grantedto the senior credit facility, but will receive proceeds only after the othertranches and will not benefit from guarantees or security granted by othermembers of the group.

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

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

| **Leverage Ratio**                               | ** ** | ** ** | ** ** | **Margin** | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|
| Less  than 3.00:1                                     |       |       | 1.250      | %          |       |
| Greater  than or equal to 3.00:1 but less than 3.40:1 |       |       | 1.375      | %          |       |
| Greater  than or equal to 3.40:1 but less than 3.80:1 |       |       | 1.500      | %          |       |
| Greater  than or equal to 3.80:1 but less than 4.20:1 |       |       | 1.625      | %          |       |
| Greater  than or equal to 4.20:1 but less than 4.50:1 |       |       | 1.750      | %          |       |
| Greater  than or equal to 4.50:1 but less than 4.80:1 |       |       | 1.875      | %          |       |
| Greater  than or equal to 4.80:1 but less than 5.00:1 |       |       | 2.125      | %          |       |
| Greater than  or equal to 5.00:1                      |       |       | 2.250      | %          |       |

 

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The applicable interest margins for Tranche B and Tranche C are asfollows (including our new Tranche B5 and B6 term loan facilities):

| **Facility** | ** ** | ** ** | ** ** | **Margin** | ** ** |
|--------------|------------|------------|------------|------------|------------|
| B1           |       |       | 2.125      | %          |       |
| B2           |       |       | 2.125      | %          |       |
| B3           |       |       | 2.000      | %          |       |
| B4           |       |       | 2.000      | %          |       |
| B5           |       |       | 2.125      | %          |       |
| B6           |       |       | 2.125      | %          |       |
| C            |       |       | 2.750      | %          |       |

 

In May 2007, weexpect to make a mandatory prepayment of £73.6 million under our senior creditfacility as a result of excess cash flow generated in 2006.

*Senior Notes*

On July 25,2006, Virgin Media Finance PLC issued U.S. dollar denominated 9.125% seniornotes due 2016 with principal amount outstanding of $550 million. The seniornotes due 2016 are unsecured senior obligations of Virgin Media Finance PLC andrank pari passu with Virgin Media Finance’s outstanding senior notes due 2014.The senior notes due 2016 bear interest at an annual rate of 9.125% payable on February 15and August 15 of each year, beginning February 15, 2007. The seniornotes due 2016 mature on August 15, 2016 and are guaranteed by VirginMedia, Virgin Media Group LLC, VMIH and certain other intermediate holdingcompanies in the group.

The U.S. dollardenominated 8.75% senior notes due 2014 were issued by Virgin Media Finance PLCon April 13, 2004 and have a principal amount outstanding of $425 million.The sterling denominated 9.75% senior notes due 2014 were issued by VirginMedia Finance PLC on April 13, 2004 and have a principal amountoutstanding of £375 million. The euro denominated 8.75% senior notes due 2014were issued by Virgin Media Finance PLC on April 13, 2004 and have aprincipal amount outstanding of €225 million. The senior notes due2014 mature on April 15, 2014 and are guaranteed by Virgin Media, Virgin Media Group LLC, VMIH and certain of theintermediate holding companies in the group.

*Restrictions under our Existing DebtAgreements*

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

·       incur or guaranteeadditional indebtedness;

·       paydividends or make other distributions, or redeem or repurchase equity interestsor subordinated obligations;

·       makeinvestments;

·       sellassets, including the capital stock of subsidiaries;

·       enter intosale and leaseback transactions or certain vendor financing arrangements;

·       createliens;

·       enter intoagreements that restrict the restricted subsidiaries’ ability to pay dividends,transfer assets or make intercompany loans;

·       merge orconsolidate or transfer all or substantially all of their assets; and

·       enter into transactions with affiliates.

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*DebtRatings*

To access public debt capital markets, we rely on credit ratingagencies to assign corporate credit ratings. A rating is not a recommendationby the rating agency to buy, sell or hold our securities. A credit ratingagency may change or withdraw our ratings based on its assessment of ourcurrent and future ability to meet interest and principal repaymentobligations. Lower credit ratings generally result in higher borrowing costsand reduced access to debt capital markets. As at March 31, 2007, thecorporate debt ratings and outlook assigned by the rating agencies engaged byus are as follows:

| ** **                           | ** ** | **Corporate  Rating** | ** ** | **Outlook** | ** ** |
|--------------------------------------|------------|-----------------------|------------|-------------|------------|
| Moody’s  Investors Service Inc. |       |                  | Ba3        |        |       | Stable |   |
| Standard &  Poor’s     |       |                  | B+         |        |       | Positive |   |

 

**CashDividends**

On February 27,2007, our Board of Directors approved and declared the payment of a regularquarterly cash dividend of $0.02 per share on March 20, 2007 tostockholders of record as of March 12, 2007, totaling £3.3 million. Futurepayments of regular quarterly dividends by us are at the discretion of ourBoard of Directors and will be subject to our future needs and uses of cash  which could include investments in operations,the repayment of debt, and share repurchase programs.

**Off-BalanceSheet Arrangements**

As of March 31,2007, we had no off-balance sheet arrangements.

**CONTRACTUALOBLIGATIONS AND COMMERCIAL COMMITMENTS**

There have beenno material changes in the three months ending March 31, 2007 to theinformation required under this Item from what was disclosed in our AnnualReport on Form 10-K for the year ended December 31, 2006 asfiled with the SEC on March 1, 2007.

**ITEM 3.**   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have beenno material changes in the three months ending March 31, 2007 to theinformation required under this Item from what was disclosed in our AnnualReport on Form 10-K for the year ended December 31, 2006 asfiled with the SEC on March 1, 2007.

**ITEM 4.**   CONTROLS AND PROCEDURES

***(a)****         **Disclosure Controls and Procedures.*

Our management,with the participation of our chief executive officer and chief financialofficer, has evaluated the effectiveness of our disclosure controls andprocedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended, which we refer to as theExchange Act) as of the end of the period covered by this report. Based on suchevaluation, our chief executive officer and chief financial officer haveconcluded that, as of the end of such period, these controls and procedures areeffective to ensure that information required to be disclosed by the registrantin the reports the registrant files or submits under the Exchange Act isrecorded, processed, summarized, and reported within the time periods specifiedin the Securities and Exchange Commission’s rules and forms. Thesedisclosure controls and procedures include, without limitation, controls andprocedures designed to ensure that information required to be disclosed by theregistrant in the reports that it files or submits is accumulated andcommunicated to the registrant’s management, including our chief executive officerand chief financial officer, as appropriate to allow timely decisions regardingrequired disclosure.

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***(b)****         **Changes in Internal Control Over FinancialReporting*

OnMarch 3, 2006, we completed the reverse acquisition of Telewest and onJuly 4, 2006, we completed the acquisition of Virgin Mobile. As aconsequence of our continued integration of these acquisitions, we have madeand expect to make further material changes to our internal control overfinancial reporting. Other than as stated above, there were no changes in ourinternal control over financial reporting (as such term is defined inRules 13a-15(f) and 15d-15(f) under the ExchangeAct) during the first fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

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**PART II—OTHERINFORMATION**

**ITEM 1.**                LEGALPROCEEDINGS

We are involvedin disputes and litigation arising in the ordinary course of our business. Weare also involved in various disputes and legal proceedings, none of which is amaterial pending legal proceeding that exclusive of interest and costs, isanticipated to exceed 10% of our and our subsidiaries’ current assets on aconsolidated basis, or is otherwise reportable in response to this item.

**ITEM 1A: RISK FACTORS**

There have beenno material changes in the three months ended March 31, 2007 in the riskfactors discussed under “Risk Factors” and elsewhere in our Form 10-K forthe year ended December 31, 2006 as filed with the SEC on March 1,2007.

**ITEM 2.**                UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

**ITEM 3.**                DEFAULTSUPON SENIOR SECURITIES

None.

**ITEM 4.**                SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters weresubmitted to a vote of our security holders in the quarter ended March 31,2007.

**ITEM 5.**                OTHERINFORMATION

As reported inour proxy statement filed with the SEC on April 13, 2007, our CompensationCommittee approved the Virgin Media Inc. 2007 Bonus Scheme. The terms of theScheme are described in our proxy statement. No individual awards have beenmade or communicated under the Scheme.

**ITEM 6.**                EXHIBITS
| 3.1  |   | Second restated certificate of incorporation of  Virgin Media Inc. (Incorporated by reference to Virgin Media Inc.’s Annual  Report on Form 10-K filed with the Securities and Exchange Commission on  March 1, 2007).                                                                                                                                                                                                                |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2  |   | Restated by-laws of Virgin Media Inc.  (Incorporated by reference to Virgin Media Inc.’s Annual Report on  Form 10-K filed with the Securities and Exchange Commission on  March 1, 2007).                                                                                                                                                                                                                                            |
| 10.1 |   | Senior Facilities Agreement dated 3  March 2006 as amended and restated on 22 May 2006, 10 July 2006,  10 August 2006 and 4 April 2007, between, among others, Virgin  Media Inc., certain of its subsidiaries (as Borrowers and/or Guarantors) and  Deutsche Bank AG, London Branch, J.P. Morgan Plc, The Royal Bank of Scotland  Plc and Goldman Sachs International (as Bookrunners and Mandated Lead  Arrangers).* |
| 10.2 |   | Compromise Agreement dated as of  February 28, 2007 between Virgin Media Inc., Telewest Communications  Group Limited and Neil R. Smith.*                                                                                                                                                                                                                                                                                                       |
| 31.1 |   | Certification of Chief Executive Officer,  pursuant to Rule 13(a)-14(a) and Rule 15d-14(a) of the  Exchange Act.*                                                                                                                                                                                                                                                                                                                |
| 31.2 |   | Certification of Chief Financial Officer,  pursuant to Rule 13(a)-14(a) and Rule 15d-14(a) of the  Exchange Act.*                                                                                                                                                                                                                                                                                                                |
| 32.1 |   | Certifications of Chief Executive Officer  and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as  adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*                                                                                                                                                                                                                                                          |

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*                    Filed herewith

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15 (d) of the SecuritiesExchange Act of 1934, the registrants have duly caused this report to be signedon their behalf by the undersigned thereunto duly authorized.

|                         |     | VIRGIN MEDIA INC.                         |
|-------------------------|----------|-------------------------------------------|
| Date: May 10, 2007 |     | By:                                       | /s/ STEPHEN A. BURCH |
|                    | * * | * *                                  | Stephen A. Burch |
|                    | * * | * *                                  | *Chief Executive Officer* |
| Date: May 10, 2007 |     | By:                                       | /s/ JACQUES KERREST |
|                    | * * | * *                                  | Jacques Kerrest |
|                    | * * | * *                                  | *Chief Financial Officer* |
|                    |     | VIRGIN  MEDIA INVESTMENT HOLDINGS LIMITED |
| Date: May 10, 2007 |     | By:                                       | /s/ STEPHEN A. BURCH |
|                    | * * | * *                                  | Stephen A. Burch |
|                    | * * | * *                                  | *Chief Executive Officer* |
| Date: May 10, 2007 |     | By:                                       | /s/ JACQUES KERREST |
|                    | * * | * *                                  | Jacques Kerrest |
|                    | * * | * *                                  | *Chief Financial Officer* |

 

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