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Liberty Global doubts the pound, but Virgin Media is doing alright

Virgin Media

Liberty Global has softened its outlook due to the performance of the pound in global financial markets, but despite the pessimism, Virgin Media doesn’t seem to be doing that bad.

While Virgin Media’s mobile business was hit by relatively by attrition of low-ARPU prepaid subscribers, this was one of the few low points of the quarter which saw 82,000 broadband internet net additions, postpaid gains of 37,000 and a 92% y-o-y boost in the number of B2B customers. Total revenues for the quarter increased by 2% to £1.214 billion, once fluctuations in the FOREX market have been removed.

The negative tone of the Liberty Global Group would appear to be in relation to the FOREX markets, but also increased competition in the UK, demanding the business shift to a bundled service model. Numerous offers and a more evident race to the bottom might be having an impact, but in the more lucrative business units subscriber numbers are heading in the right direction. The Virgin Media team cannot really do anything about the global FOREX market, but for what it can control in the UK, the numbers seem to be heading in the right direction.

Your correspondent has noticed more of an over-the-top advertising presence for the brand, but this does also seem to be represented on the infrastructure side of things as well. The ‘Homes Passed’ metric used by the company (the number of customers which can be serviced without materially extending the physical footprint) for cable, this has increased y-o-y from 13.8 million in Q1 2016 to 14.4 million in Q1 2017.

On the cable side of things, revenues increased 3.4% to £863.9 million, taking the total number of subscribers up to 5.4 million, representing a net gain of just under 82,000 for the quarter. Perhaps another interesting statistic is the number of triple play customers (broadband, TV and fixed-line) represents 62.3% of the total. This itself is an impressive proportion, though it should be noted it might be slightly misleading.

Your correspondent is a Virgin Media subscriber (and largely satisfied with the service), and under the current contract there is not an option to subscribe to broadband alone. It doesn’t cost any more or less to consume the extra services, and largely we don’t in this household. It’s not necessarily a good or bad thing, just worth noting.

The B2B revenues is another interesting area, as it would appear the team is targeting a relatively niche, and mostly ignored segment of the UK; Small office or Home office (SOHO) subscribers. Revenues in this business unit were up 1% across the quarter, though the team highlighted conversion of residential customers to a more lucrative SOHO contracts was a successful venture across the period.

This is not a strategy which is unique to the Virgin Media business as other business units in the Liberty Global group have been showing it can be a successful approach to the B2B segment. Unity Media grew the segment by 45% across the same period, with it now accounting for 3% of total revenue. VTR.com upsold the B2B product suite to an additional 11,000 customers.

This customer base is hardly going to shake the foundations of the Liberty Global bank account, but it’s a smart idea to increase revenues out of the small, but fast growing segment of home workers and entrepreneurs.

The main downer for the Virgin Media business was in the mobile business unit, though this should be taken with a slight pinch of salt. Mobile subscription revenue declined by 11% across the period, though the team has attributed this decline migration of customers from subsidised handset propositions to the Freestyle offer. Handset costs are effectively made upfront here, resulting in the revenues being reported elsewhere, resulting in a lower ARPU.

Total number of mobile customers did increase by 37,000, though the sharp decline in the number of prepaid customers (88,000) marred the figures slightly. It is a short-term loss, though the trend of converting a greater percentage of customers onto the postpaid side of things is certainly a positive sign for the future.

Overall, the quarter is not the ground-shaker which investors might have been hoping for, but there were certainly some positive signs to offer encouragement for Virgin Media in the mid- and long-term future. Perhaps the overlords at Liberty Global got up on the wrong side of the bed this morning?


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