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Virgin Media UK Reports Customer Decline to 4.31 Million Broadband ISP Users

Posted: 27th Jul, 2011 By: MarkJ
virgin media uk best cable broadbandCable giant Virgin Media UK has reported its latest Q2-2011 financial results and a surprise -18,100 quarterly decline in their total broadband ISP subscriber base, which has gone from 4,332,600 in Q1-2011 to 4,314,500 now. The situation marks a very unexpected change with Virgin having originally managed to report an increase in growth of +45,600 during the previous quarter (Q1-2011).

A significant part of the latest Q2 decline could be the "net cable disconnections of 36,000" (i.e. those leaving Virgin's service), which are described as being 90% "lower-value single or dual-play [e.g. broadband and phone] customers". This group is likely to have been hardest hit by the recent price hikes, such as in line rental.

Neil Berkett, CEO of Virgin Media, said:

"There is a growing and increasingly broadbased population of people who are becoming dependent on next generation digital technology and are prepared to pay for quality services. During the first half, we have continued to focus relentlessly on delivering superior services tailored to the needs of these data-hungry households and businesses.

The increasing demand is evident in a 25% increase in data consumption among Virgin Medias customers in just six months who have watched and downloaded more content then ever before. This trend is rapidly transforming the profile of our subscriber base, with more than half of all new broadband customers choosing 30Mb or higher compared to just 18% a year ago.

As digital media services become more central to our professional, family and social lives, the combination of our leading network and a clearly differentiated range of products makes Virgin Media uniquely equipped to exploit the growth opportunity that this presents. During the quarter, we have seen an encouraging early take-up of Virgin Media TiVo, our new game-changing entertainment platform, and we have recently unveiled a high impact advertising campaign which will see this compelling service marketed to new customers for the first time.

The significant increases in free cash flow and OCF, together with steady revenue growth, are testimony to the resilience of our targeted strategy during a difficult economic climate and discount-led competitor activity. Management's continued confidence in our underlying business approach, and ability to drive sustainable growth in shareholder value, is reflected in a new £850 million capital return programme, which is designed to take the total amount of stock repurchased since mid 2010 to £1 billion."

The vast majority of Virgin's broadband subscribers use its faster cable platform, although the Virgin.net (Virgin National) / ADSL2+ based non-cable services still accounted for 265,900 of the total in Q2-2011 (down from 271,800 one year ago).

Meanwhile half of all new subscribers in the quarter ordered speeds of 30Mbps or more, compared to 18% ordering 20Mbps or higher a year ago and 1 Million customers now subscribe to service tiers of 20Mbps or above. Virgin would thus do well not to try and over-hike the prices of its existing lower-tier users, whom are more likely to be facing tougher economic conditions.

Some 170,000 customers now take Virgin's latest 50Mbps and 100Mbps superfast broadband products, which is more than twice as many as a year ago and a 45% increase since the year-end. The rollout of their latest 100Mbps service is due to complete by mid-2012.

It will be interesting to see how Virgin Media copes with the sudden decline in their broadband subscribers and what it will do in an attempt to attract them back again. Many might have left due to pricing concerns, although email problems and router performance woes have also caused a few problems during the last quarter.

Meanwhile Virgin claims that "[the] value of [a] customer base is more important than customer numbers", which is what you tell accountants and shareholders to mask a very real concern.
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