Blog Post

Earnings: Virgin Media VOD, Broadband Grow But Rebranding Hits Bottom Line

British triple-play telco, cable and broadband provider Virgin Media posted a Q1 2007 operating loss of £15.3 million ($30.6 million). This was the first quarter in which the former ntl:Telewest had truly operated as Virgin Media, the rebranding having followed last year’s merger with Virgin Mobile. The company lost many customers in this period thanks to its spat with BSkyB.

Update: Virgin’s website added more details. Revenue slid from £1.08 billion (just over $2 billion) last quarter to £1.02 billion this time around. The company overall lost 46,900 cable subscribers in the quarter, blamed on “the loss of BSkyB’s basic channels from our platform and to increased competitor activity”. The company expects churn from disgruntled Virgin customers, switching to BSkyB in pursuit of shows like Lost, will become more pronounced next quarter because disconnections take 30 days to complete. It expects to lose more customers overall then as a result.

Broadband: The company added 87,900 cable broadband customers in the quarter, up from 78,100 in the last quarter. It now has 3.15 million such customers and is trialling a 50Mbit service.
Television: Virgin now enjoys 3.39 million digital TV subscribers thanks to a 75,200 addition for the quarter – but that’s fewer than last quarter’s 83,900 additions. “Growth has been strong due to the continued roll-out of new products alongside compelling marketing and product propositions.”
Mobile: Revenue from the mobile division fell this quarter from £151.7 million ($303 million) to £141 million ($282 million), blamed on a spike in subscriptions and usage during Christmas. Virgin added 54,200 high-ARPU subscriptions (only 8,400 in the previous quarter) thanks to cross-selling to the newly-acquired TV and broadband subscribers). Low-ARPU subscribers fell by 115,500 during the quarter, however, thanks to that Christmas spike and increased competition.
Telephony: Virgin lost 63,400 phone subscribers – mostly, it said, because customers opting for broadband service from ADSL rivals must take telephony from a non-cable supplier.
VOD: Virgin did say 43 percent of its digital TV subscribers now use its video on-demand service every month — as well as carriage for 4OD, BBC and Living program via on-demand catch-up, the supplier struck direct deals with US distributors to offer unbroadcast content over its Virgin Central on-demand channels. The company reported it now numbers 150,000 subscribers for V+, its full-featured HD PVR of the Tivo and Sky+ ilk, and that this had doubled during the quarter. The service had enjoyed little awareness when named TVDrive under the old Telewest operator. While TV and broadband enjoyed growth, Birch conceded “fixed-line telephone continues to struggle”.
Branding: The cost of rebranding the three companies (ntl, Telewest and Virgin Mobile) under a single identity sucked a £25 million ($50 million) investment out of the new outfit but CEO Steve Birch, in a statement, promised “long-term benefits.”