Virgin Media O2 posts lacklustre Q1

The UK telecoms operator highlighted an improved service revenue trend in the three months to the end of March, but its top line declined, as did earnings, and its customer base could look healthier.

Overall, its fixed-line customer base fell by 2,000 in Q1, as fibre growth failed to offset the declining trend of the broader sector, while its mobile customer net losses, excluding IoT and wholesale, came in at almost 197,000; most tellingly, the firm's contract customer base recorded 74,500 net losses.

Funnily enough, VMO2 was most keen to highlight its progress in fibre. Its Nexfibre wholesale fibre network venture, backed by InfraVia Capital Partners, Liberty Global and Telefónica, grew its footprint by 194,000 premises in the first quarter and in April reached the 1 million premises milestone.

The company also said that the pace of fibre upgrade activity across the existing VMO2 footprint increased year-on-year, but it was a bit light on specifics. Planning is ongoing for the NetCo fixed network venture the firm and its parent companies announced earlier this year, which will comprise its cable and fibre network assets, it said.

Another Q1 highlight for VMO2 is its 5G progress, but again the telco isn't keen to tell us much. "Investment in 5G coverage and capacity also continued in Q1," it said, referring to the switch-on of 5G Standalone in 14 UK cities.

"While there is much to do in the remainder of the year, we are gathering momentum in accelerating fibre build and marketing the Nexfibre footprint, launching new services to enhance and improve customer experience, and progressing wider IT efficiency programmes as we continue our digital transformation," said Lutz Schüler, CEO of Virgin Media O2.

"Ahead of price rise implementation, we delivered improved service revenue growth across both mobile and consumer fixed. Our teams also continue to innovate as shown by the targeted launch of 5G Standalone and a new 2Gbps broadband service on the Nexfibre network in Q1, highlighting the future evolution of our networks as demand rises and new technologies emerge," Schüler added, noting that the firm has reiterated its full-year guidance.

Not that those target figures are particularly inspiring either; VMO2 is looking at declines in both revenue and EBITDA.

In Q1 the telco's total revenue slid by 0.5% on-year to £2.59 billion and revenue excluding the impact of its Nexfibre construction declined by 4.3%. This drop was driven in no small part by a huge 24.6% decrease in low-margin handset revenue, which offset service revenue growth and led to a total mobile revenue slide of 4.7% to £1.36 billion. Nexfibre construction revenue drove a 35.5% increase in 'other' revenue to £294.5 million, offset in part by reduced ICT turnover.

Essentially, VMO2's first quarter numbers don't look great and no matter how hard it bigs up its fibre rollout – which is admittedly going well – it can't hide its headline metrics.