A Look at the Impact of Project Lightning on Virgin Media in West Yorkshire
Analysts at global telecoms market intelligence firm ThinkCX have published a new report that examines the extent to which Virgin Media’s (VMO2) “Project Lightning” broadband expansion in West Yorkshire (England) “arrested a decline in its local market share and led to net growth“.
In case anybody has forgotten, Project Lightning added 3.2 million premises to Virgin Media’s UK fixed line network coverage (a mix of Hybrid Fibre Coax and full fibre FTTP lines), which took them to a total of 16.14 million premises passed by completion at the end of 2022.
However, from an investor’s perspective, one of the most meaningful measures of a Return on Investment (ROI) is subscriber growth relative to the competition. Put another way, did Project Lightning’s increase in homes passed result in an actual uplift in market share? In order to test this, ThinkCX took a look at the West Yorkshire region, which is home to big locations like Leeds, Bradford, Halifax, Huddersfield and Wakefield etc.
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Virgin Media began connecting homes with Fibre-to-the-Premises (FTTP) technology across various West Yorkshire communities in late 2020 (prior to that it was mostly HFC). ThinkCX’s main measurement period used for this analysis encompasses the last 6 months of 2020 as a benchmark, and then the 12 months to December 2021 to study the impact on consumer take-up as the new networks became available to residents.
At the beginning of the measurement period (June 2020), Virgin Media’s market share in West Yorkshire was 23.04%, and by the end of the period (December 2021), it had risen to 23.55%. This is not overwhelmingly higher (a rise of 0.51% percentage points, or a 2.2% increase), but is still a positive increase over the 18-month period.
Not to mention that, at the beginning of the benchmark period, Virgin Media’s market share was actually declining on a month-over-month basis, and they were able to arrest that medium-term fall.
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“In the 14 months since the end of the period scrutinised above, Virgin Media has continued steadily growing market share in West Yorkshire, although the pace has been slower than in the interval immediately following the network improvements. By the end of January 2023, its overall West Yorkshire market share had increased to 23.81% (a rise of 3.3% since Project Lightning), with only slightly negative month-over-month numbers in just two of those last 14 months,” said ThinkCX.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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All very impressive, but not quite the whole story. If we take Project Lightning’s customer-adding start date as end 2016, VM had 5.28m internet customers and 12.6m homes passed. Fast forward to end 2022, and those numbers become 5.65m customers and 16.1m homes passed. Whilst the accounting appears to be unclear, at the start, VM announced the capex for Lightning to be £3bn. Now, spending £3bn to gain a net 370k customers is over £8k per customer. That’s pretty value destroying, and shows up in VM’s unparalleled debt mountain. Clearly they will have added a lot more than 370k customers in the Lightning build out areas, but evidently that’s being offset by notable levels of attrition in the legacy areas (either that, or Martians are whisking VM customers away). So put bluntly, VM’s business model is losing customers on a pro-forma basis, and the company are disproportionally increasing debt to achieve a fairly modest growth in customer numbers. And worst of all, most of these remarkably undistinguished performance figures refer to a world when VM were the only high speed proposition in their service areas.
VM badly need to figure out a way to make a return on the capital they employ (and allow for the incoming costs of the XGS-PON roll out). Perhaps my esteemed fellow readers would like to help out VM’s management with the possible answers to that?
These figures are pretty meaningless.
From my observations Virgin have spent a lot of money adding 3Million premises passed and yet subscriber numbers have been pretty static. This means that either nobody is buying in Lightning areas or they are haemorrhaging customers in legacy areas.
Virgin’s glacial speed Nexfibre rollout also isolates the legacy network from wholesale which makes me think they are only confident in Nexfibre with other peoples money at risk.
There are wrong figures quoted for VM from 2016 to 2022 as the UK customer numbers are 5,284,000 and 5,795,500 respectively, meaning a net increase of 511,500 or 9.6%.
Well I am not surprised. The geeky buyer knows to stay well away from VM, years of contention in countless areas, bad latency due to technology and more contention, traffic throttling for years, unreliable service (I have micro cuts every week), never ending hagging dance with Retentions to keep a decent price and now they joined the mid contract price increase train. Pretty much every possible way they could screw up their customers they have done. Now they have FTTP which is XGS-PON but it still has high latency until they can convert all their services to digital. Now most people don’t know all of these issues but they probably heard of a few at least and if not they haven’t heard anything good about them, no one recommends them. It comes a point where there is no one else to screw so you kinda ran out of customers…
Some Altnets get 10, 20 and even 30% in some areas. Why is that? Well they bring truly fast and truly low latency speeds, symetric in a lot of cases, at low prices and they don’t have bad history of the big telcos. Whether the ltnets will be able to sustain these level of rpices and services is up for discussion, but it’s clear that customers do like the offering.
‘Now they have FTTP which is XGS-PON but it still has high latency until they can convert all their services to digital.’
FYI the FTTP VM are selling isn’t XGSPON right now. As soon as that gets switched on and a customer moves things will improve whether the analogue / RFoG stuff is still there or not. 🙂
May not be great still due to VM’s architecture but will cut a good 4 ms from first hop baseline latency and 4 ms from jitter.
My first hop on XGSPON is pretty good.
10 of 10 packets received
0 % packet loss
Min: 0.562 ms Avg: 0.779 ms Max: 0.923 ms
Top churn reduction tips
No out of contract price gouging
No offshore call centres
No RPI plus price rises
Don’t run the network permanently at the edge of collapse
Hope that helps, cheaper than McKinsey!
Have to agree all that, but customers have been telling that VM for years, and nothing changes.
I’m surprised ThinkCX would produce a relatively random piece of research on a regional investment by a non-quoted company, and that they’d miss the big picture so badly. I have to guess that since the underlying data would not be publicly available that it’s been commissioned by VMO2 as tinsel to distract from that big picture?
Perhaps a bit like VM’s attempts to change Trustpilot ratings with invited reviews, where the requested reviews all read something like “Great service from Iqbal when I phoned to add movies to my package”, or “Just had VM installed, not tried it out but really great service!”, and there’s a massive difference between the organic and requested ratings.
Or like VMO2 financials, that focus only on what VMO2 want to say, and sweep away GAAP and standard presentations and analysis of corporate performance.
Seems VMO2 think they can change reality by declaring it to be how they’d like it to be.