On-demand TV helps Virgin beat expectations

More viewers than ever watching movies and TV shows on Virgin Media's catch-up service helped the group beat revenue expectations in the three months to the end of September.

Virgin's chief executive Neil Berkett was delighted with growth in the video-on-demand (VoD) service, which allows viewers to watch BBC and Channel 4 shows as well as Hollywood movies. The service hit 66 million average views a month during the quarter, 46 per cent higher than the previous year.

He said: "We differentiate ourselves with the VoD product; it is really coming to the fore. It is a real growth prospect for us and we have barely scratched the surface."

Virgin is set to face increased competition in on-demand programming next year. BSkyB is to launch a VoD service next year, while the BBC, ITV, BT and Five are working on Project Canvas, a move to bring internet TV into the living room. Mr Berkett was undaunted, saying: "Bring it on," he said "This is a world that cable was made for."

Revenues at Virgin Media rose 1.3 per cent to £953m in the three months to the end of September, up from £941m the previous year, and beating analyst expectations by 1 per cent. It added 17,800 net new customers to services excluding mobile over the three months. Jerry Dellis, an analyst at JP Morgan, called the results "very strong".

Mr Berkett said: "The growth was really pleasing as it was not just through cost cutting." He added pay TV services benefited from people staying at home more: "Pay TV is good value for money and broadband is a necessity."

Part of the rise in revenues has been due to the group's success in attracting "higher value customers, who buy more from us and stay with us longer". Average revenue per subscriber grew 6 per cent to £44.24. Virgin's services cost, on average, £18 each. Carphone Warehouse's cost about £12. Mr Berkett said the rise in revenues shows viewers were happy to pay more for quality: "We are concentrating on value for money not on the cheapest."

Customers using three of the group's services, from pay TV, broadband, home phone and mobiles, rose from 54.7 per cent to 59.5 per cent last quarter. Virgin Mobile also saw 88,000 net new customers in the quarter, but revenues at the mobile arm were down from £146m in the third quarter of 2008 to £134m, with the group blaming the fall in mobile termination charges.