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Virgin Media - Full Year And Fourth Quarter 2012 Results

No amortization expense was incurred, compared to £28.1m in the same quarter last year, as all intangible assets subject to amortization became fully amortized in the fourth quarter of 2011.

Income tax benefit

Over the last two decades we have invested over £13bn building our cable network and have incurred losses in operating that infrastructure. Under UK tax law certain of these investment costs and operating losses are offset against future operating profits, giving rise to deferred tax assets. We have historically recorded a full valuation allowance to reduce the value of these assets to zero.

Under US GAAP accounting principles, we are required to continually evaluate the need for a valuation allowance and have determined it is more likely than not that in future we will generate sufficient pre-tax income to utilise substantially all of our UK deferred tax assets related to unclaimed capital allowances and net operating losses. An important factor in our assessment was the fact that during 2012, we moved into a three year cumulative pre-tax profit position in the UK for the first time. Therefore, as required by the applicable accounting rules, we have reduced the valuation allowance, which has resulted in a non-cash income tax benefit of £2.6billion.

NET INCOME

Net income was £2.7bn compared to £48.2m in the fourth quarter last year. The improvement was mainly due to the reduction in the deferred tax asset valuation allowance outlined above.

CAPITAL EXPENDITURE

Fixed assets

Fixed asset additions (accrual basis) 7 in the quarter were down £18.3m to £208.7m. This was mainly due to the fourth quarter of 2011 including £30m in relation to conversion of TiVo operating leases to capital leases for set top boxes received prior to that quarter, together with lower spend on non-upgrade network activities and other projects, partially offset by £36.3m spent on our broadband speed upgrade in the fourth quarter of 2012.

The total purchase of fixed and intangible assets in the quarter was up £33.4m at £210.8m mainly due to a reduction in assets acquired under capital leases. Total purchase of fixed and intangible assets included £51.0m spent on the ongoing broadband speed upgrade programme

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