Economic volatility is beginning to nibble at Virgin Media O2, in spite of an encouraging third quarter performance.

Adjusted revenue for the three months to 30 September was down slightly to £2.59 billion from £2.60 billion a year earlier. Mobile service revenue, which was up 4.3 percent year-on-year, seems to be the only segment to have enjoyed any growth: handset revenue showed a 3.7 percent decline, and at the fixed-line business, consumer revenue fell 2 percent to £851.2 million, while B2B fell more sharply to £130.2 million from £155.5 million.

Q3 was a mixed bag operationally as well. VMO2’s fixed-line customer base reached 5.78 million, up from 5.72 million in Q3 last year, but net additions fell to 12,300 from 38,500. Similarly on the mobile side, retail connections increased to 33.51 million from 31.86 million, but net additions were down to 412,500 from 506,500.

Digging into those retail mobile net adds reveals some potential shifts in consumer spending habits. Contract net additions – i.e. the big spenders – fell year-on-year to 46,500 from 108,000. Meanwhile, on the more cost-conscious prepaid side of the operation, customer net additions came in at 35,600, compared to a 78,500 net loss in Q3 2021.

“This quarter has seen an increasingly challenging macroeconomic backdrop against which we continue to provide high speed and quality services whilst supporting our customers and people through these challenging times,” said VMO2 chief executive Lutz Schüler, in a statement. “Additionally, we accelerated our growth in profitability as our commercial momentum advanced and we continue to make strong progress on our three growth waves of expanding and upgrading our network, realisation of synergies and digitalising our business.”

Amid all the economic and political instability in the UK, VMO2’s Project Lightning network expansion programme rumbled on, passing an additional 115,000 premises during the quarter, taking its total footprint to 3 million. 330,000 premises have been passed since the start of the year and the company expects to hit its target of adding 500,000 to its footprint by the end of 2022.

And despite the economic headwinds, transaction-adjusted EBITDA was up a healthy 8.6 percent year-on-year to £991.2 million, and its margin improved to 38.3 percent from 35.1 percent.

This is a company that is still getting to grips with being a joint venture though, and once capex, opex and various incidental costs relating to the integration of Virgin Media and O2 are accounted for, transaction adjusted EBITDA comes in at £343.9 million, down 5.9 percent on last year. These integration costs – lumped together as ‘capex and opex cost to capture (CTC)’ on the balance sheet – increased to £77 million from £20.1 million a year earlier.

VMO2 also reiterated its full-year guidance. It still expects improving revenue and increased synergies to result in mid-single-digit growth in pro forma transaction adjusted EBITDA before CTC. It also expects opex and capex CTC of over £300 million and property and equipment (P&E) costs of around £2.1 billion as the company continues to ramp up its network spending.

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