Virgin Media is squeezed as its revenues start to slow
Saturday 15 February 2014
Virgin Media is feeling the squeeze on multiple fronts as the American-owned firm saw slower revenue growth and it won fewer pay-TV and broadband customers than BT and BSkyB.
Virgin added 39,000 broadband subscribers and 19,000 pay-TV customers in the last three months of 2013. That compares with BT, which won 150,000 in broadband and 70,000 in TV, and Sky, which got 110,000 in broadband and 77,000 in TV.
Virgin, owned by John Malone’s US media giant Liberty Global following a £15bn takeover, saw revenues rise only 0.4 per cent to $1.66bn (£998m) in the quarter. Growth for the full year was cut to 2 per cent as a result.
The real squeeze looked to have been in business services, where revenues tumbled more than 10 per cent, and in mobile. Mobile subscribers fell by 41,700 as Virgin shed cheaper pre-pay customers, which offset growth in contract deals.
Virgin, which has 4.9 million customers, said the “continued pressure” on the mobile and business divisions “offset” growth in cable revenue from broadband and pay-TV, which benefited from price rises a year ago.
Those close to Virgin claimed cable growth was evidence that it is not suffering at the expense of BT, which began offering free live Premier League games to its broadband subscribers last summer.
However, analysts at Jefferies bank were unimpressed as they contrasted Virgin’s performance with BT’s “very strong” broadband numbers, in particular.
Jefferies described Virgin’s increase of 0.4 per cent in quarterly group revenues as “a material shortfall” as it was below their expectations.
BT returned to growth with sales up 2 per cent in the last quarter. BSkyB was up 5.2 per cent and low-cost rival TalkTalk was up 5.1 per cent. Virgin insisted its performance was consistent as it was not trying to chase customer growth. But Liberty admitted its group revenue and cash flow growth were higher without Virgin.
Mr Malone, dubbed Darth Vader because he is known as a demanding boss, may take some comfort from forecasts from analysts at Pivotal Research Group, which reckoned profits should “accelerate” in 2014.
Virgin’s chief executive, Tom Mockridge, maintained it had “strong financial fundamentals and improving operational momentum towards the end of the year, even with heightened competition”.
Mr Mockridge, the former boss of News International and Sky Italia, who joined last summer, said Virgin had persuaded more new and existing customers to pay for TiVo pay-TV and superfast-broadband, which brought in more revenue. TiVo customers were up 137,000 and super-fast broadband deals rose 209,000.
Liberty Global has been on an acquisition drive to build a pan-European telecoms and TV business, buying Ziggo in the Netherlands and bidding for Ono in Spain in recent months.
Mr Mockridge said being part of Liberty was helping Virgin and it is “working across Europe” to share talent and resources within the group.
Virgin remains Britain’s second-biggest pay-TV firm, behind Sky but well ahead of BT.
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