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Virgin Media has a good quarter… we think…

Virgin Media

Virgin Media’s parent company has released its financial earnings for the last quarter apparently showing a healthy performance adding an additional 45,000 customers.

The team reported revenue growth of 3% in Q3 and year to date to £1.2 billion and £3.5 billion, respectively, with the average UK consumer price rise of 5.1%. The company now claims to have exceeded 14 Million revenue-generating-units (RGUs) with 80,000 additions in the third quarter. Marketing campaigns highlighting ‘superior speeds and additions from new build activity’ was pinned down as the primary reason for the success, as it added 95,000 new build premises to its Project Lightning initiative.

Now the RGUs is an interesting statistic. 80,000 across the period and 14 million in total does sound very impressive, though there does seem to be a bit of creative accounting here. Telecoms.com had a look at the fine print, and it does take a bit of effort to get to get to the bottom of how the company actually performed. For example, this footnote:

RGU is separately a Basic Video Subscriber, Enhanced Video Subscriber, DTH Subscriber, Internet Subscriber or Telephony Subscriber (each as defined and described below). A home, residential multiple dwelling unit, or commercial unit may contain one or more RGUs. For example, if a residential customer in our Austrian market subscribed to our enhanced video service, fixed-line telephony service and broadband internet service, the customer would constitute three RGUs

So RGU doesn’t actually tell you how many customers the company has, or even give a clear indication of the price points either. Four RGUs could be one customer, who could be subscribing to four different services from his/her neighbour, who would be paying different amounts for each RGU. Make sense, no, good. Here’s another one:

RGUs generally are counted on a unique premises basis such that a given premise does not count as more than one RGU for any given service. On the other hand, if an individual receives one of our services in two premises (e.g. a primary home and a vacation home), that individual will count as two RGUs for that service

Right. So if you are a Virgin Media customer, paying a single bill, but receiving the service in two locations, you count as two RGUs. That’s logical right? And of course, RGUs are a great way to measure the success of a business, even though the metric count mean anything. Here’s the last one on RGUs:

Services offered without charge on a long-term basis (e.g., VIP subscribers, free service to employees) generally are not counted as RGUs

The company has said it might not count free services in its metric for success, but it hasn’t explicitly said it does not. So it might include free services, it might not. Your correspondent is glad the helpful team at Virgin Media and/or Liberty Global have used such a clear metric for the industry to judge the success or lack thereof of the management team. If you actually dig down deep enough into the Liberty Global press release, not the Virgin Media one, the team do eventually state the average number of RGU per customer relationship is 2.46.

Customer relationships is at least a bit clearer. A customer relationship is defined as an individual who receives Virgin Media services, irrelevant of how many RGUs. This one appears to make more sense, but if you dig down once again you’ll find this in the fine print:

Customer Relationships generally are counted on a unique premises basis. Accordingly, if an individual receives our services in two premises (e.g., a primary home and a vacation home), that individual generally will count as two Customer Relationships

So, you may only be paying one bill, but you are actually counted as two customers. This sounds more like a homes passed metric, which is fair enough, but then that flipping fine print comes into the frame again:

Homes Passed are homes, residential multiple dwelling units or commercial units that can be connected to our networks without materially extending the distribution plant, except for DTH (Direct to Home) homes.

This does not necessarily make the statistics any better or worse for the company, but it does continue to confuse the situation.

If you are going to try and assess the success of Virgin Media, stay clear of the RGUs as a metric, it doesn’t appear to mean anything really. The business does seem to have had a relatively successful quarter, at least 3% more successful than the same period in 2015.

Maybe the reasoning behind the confusing metrics to seemingly provide a glossy and pretty finish to results which have not met expectations. Telecoms.com can only speculate, but maybe the management team were expecting a better performance and the RGUs are a means to disguise a below-par run?


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