Virgin Media enjoys income boost as customers pay for fast broadband

Published on Thursday 29 October 2009 20:24

CABLE operator Virgin Media has seen customer spend hit a record high thanks to superfast broadband and video on demand TV.

The 5 per cent rise in average spend to just over 44 per month has helped lift the group's operating income ahead of forecasts.

Virgin Media, which competes with satellite TV broadcaster BSkyB and broadband providers such as BT Group, said the number of customers taking three products of either pay-TV, broadband, fixed and mobile telephony was a record at 59.5 per cent.

The figure compares with 54.7 per cent a year ago, while just over 10 per cent of users are now subscribing to all four products.

Yesterday's results also showed that the group had added 8,100 users in the third quarter.

Churn, or the percentage of customers who left the company, remained flat at 1.5 per cent a month.

Chief executive Neil Berkett maintained a cautious outlook, saying it was too early to talk of a recovery.

"Our product set is stronger than it's ever been so I'm not surprised that we're seeing an uplift in terms of demand," he said. "But I don't think we're seeing any significant recovery in the broad economic outlook … What we're seeing is an improvement in our operations."

Under Berkett, the group has taken advantage of a cable network that passes through half of UK homes to sell its broadband and TV offerings with mobile and fixed lines in combined packages.

It also exploited its cable network to offer superfast broadband. During the quarter, the firm gained 39,000 broadband customers to give it 3.77 million in total, with more than 20,000 taking the 50Mb product.

The growth meant third-quarter revenue nudged up 1.3 per cent to 953 million, while operating cash flow, or underlying operating profit, was up 7 per cent at 348m.

Analysts had been expecting net additions of 8,000, revenue of 942m and operating cash flow of 337m.

Will Draper, an analyst at brokerage Execution, welcomed the results and said the new customer additions and number of customers taking three products were stronger than he had expected.

Virgin Media's TV service added 37,000 net customers to give it a total 3.71 million users, with an average of 66 million video-on-demand views watched per month.

&#149 BSkyB yesterday launched an appeal against a competition ruling forcing it to reduce its 17.9 per cent stake in broadcasting giant ITV.

The satellite broadcaster had bought the shares in ITV for 940m in 2006, effectively blocking cable group NTL – now Virgin Media – from buying ITV.