Broadband props up Virgin Media as mobile proves to be a drag

Virgin Media has reported another positive year, with revenues increasing 3% to £4.8 billion over the course of 2016, with broadband leading the charge, carrying the relatively jaded mobile business.

While the final quarter of the year was not quite as healthy, only reporting a 1% boost year-on-year, Virgin Media now boasts of 5.7 million cable customers and 3 million mobile subscribers. The year proved to be the best return in recent years, and the performance was also reflected at group level, where Liberty Global reported operating revenues of just under £2 billion in Europe, a 22% year-on-year increase.

“2016 was an important year for Virgin Media,” said Tom Mockridge, Virgin Media CEO. “We re-launched Virgin TV, transformed Virgin Mobile, ramped up our Project Lightning network expansion and signed more businesses. We look forward to building on this in 2017.”

The Project Lightning initiative is proving to be a good PR plus for the team as it claims to have connected 718,000 premises since the beginning of 2015. 215,000 were added through the final quarter of 2016, and Virgin Media claims customer penetration and build costs are currently in-line with business plan, while ARPU is slightly ahead.

The broadband business itself delivered 148,000 customer net additions in 2016, a 74% year-on-year increase, though customer churn might be a metric which will worry the team. Customer churn rate increased to 14.8% in the fourth quarter (up from 14.3% in 2015). Although those are certainly positive numbers in terms of net additions, it might be worth looking into why Virgin Media’s retention rate looks relatively poor.

Virgin Media also claims average speed taken by UK broadband base has increased 22% year-on-year to over 100 Mbps. This has caught your correspondent by surprise as a Virgin Media customer, as I’d be keen to meet the lucky sods getting these speeds, it certainly isn’t the case in my flat.

All-in-all, the broadband business accounted for the lions’ share of revenues, which is fortunate as the mobile business didn’t have such a positive year. Mobile subscription revenue declined by £19 million in 2016 and by £7 million in Q4 reflecting a 9.5% decline.

Mobile subscription revenue declined by 9.5% partly due to the Freestyle proposition, which allows customers to purchase phones at the beginning of the contract. Handset sales did provide a little buffer, but not enough to compensate for a £44 million decline in mobile subscriptions.

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